Yemen War Hits Gulf Markets as Saudi and Egyptian Stocks Sink
War risk ripped through Saudi and Egyptian markets on Sunday, October 25, as renewed Houthi missile and drone attacks forced investors to price the widening Yemen conflict into two of the Arab world’s most important economies.
Saudi Arabia’s benchmark Tadawul All Share Index fell as much as 2.6 percent, its worst intraday performance since April 2025, while oil giant Saudi Aramco lost 1.1 percent. Egypt’s EGX30 dropped 2.5 percent toward a seven-month low, with every constituent in negative territory, Reuters reported.
This was not ordinary volatility. Traders were reacting to the return of war as an economic fact.
Saudi air defenses intercepted two drones and a ballistic missile aimed at Riyadh, a cruise missile headed toward Khamis Mushait, and ten ballistic missiles fired toward southern Saudi Arabia, according to the Saudi-led coalition. The Associated Press separately confirmed interceptions over the capital and the south as King Khalid International Airport reopened two terminals.
The attacks reached markets because they reached the infrastructure on which the kingdom’s economic strategy depends. Airports, oil installations, logistics corridors and the financial-district skyline are not just symbols of Saudi power. They are the physical architecture of Riyadh’s effort to attract capital, diversify beyond crude and sell stability to the world.
That promise now carries a war premium.
The Houthis have already warned that Riyadh’s main airport remains a military target. Saudi authorities reopened Terminal 1 for domestic flights and Terminal 2 for international services operated by national carriers, but an airport can be technically open while investors still treat it as exposed. Every interception reinforces the same calculation: the conflict can impose costs without destroying a runway or refinery.
Egypt’s selloff carried a second warning. Parliament is expected to vote on Monday, October 26, on whether to authorize the armed forces to support Saudi Arabia if Riyadh requests help. President Abdel Fattah el-Sisi has said any assistance would be defensive and would not include attacks on Yemen. Even that limited mandate could tie Cairo more tightly to a rapidly expanding regional confrontation.
For Egypt, the stakes are severe. The country faces heavy debt obligations, high living costs and a chronic need for hard currency. Saudi capital and deposits have long served as a financial backstop. Military alignment may protect that relationship, but it also increases Egypt’s exposure to retaliation, shipping disruption and further pressure on a population already carrying the cost of repeated austerity.
The market decline therefore connected two forms of dependence. Saudi Arabia depends on the image of secure infrastructure to draw investment into its diversification program. Egypt depends on Gulf finance and regional stability to keep its own economic crisis from deepening. The Yemen war now threatens both assumptions at once.
It also exposes the limits of military containment. A United Nations-brokered truce had largely suppressed cross-border fighting since 2022. That arrangement has broken down as the Houthis seized territory along the Red Sea coast and Saudi Arabia intensified its attacks. Bab el-Mandeb, the narrow maritime gateway linking the Red Sea to the Gulf of Aden, again sits close to the front line.
The danger is not confined to balance sheets. When governments answer insecurity with larger military budgets, workers absorb the consequences through inflation, weaker public services and deferred investment. When transport and energy facilities become targets, the first damage often appears in insurance costs, delayed cargo and consumer prices long before it appears in official casualty reports.
Sunday’s selloff does not prove that a regional financial crisis has begun. It shows that investors no longer accept the fiction that the Yemen front can widen without touching the economic centers financing it. Riyadh’s towers and Cairo’s exchange now sit inside the war’s risk map.
The missiles were intercepted. The political and economic shock was not.
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