UAE equity markets posted their strongest weekly performance in months as investors responded to renewed optimism around regional diplomacy. The rebound was sharp enough to push both major benchmarks to three-month highs by mid-week, but it also highlighted how far prices still need to recover after earlier losses tied to the regional conflict.
According to market commentary from eToro, the rally gained momentum after reports that the United States and Iran had agreed on a memorandum of understanding intended to help end the conflict. A signing ceremony was initially expected for June 19 in Switzerland, and markets moved on the expectation that diplomatic progress could reduce uncertainty for risk assets.
Three-month highs, led by a headline-driven rebound
The two main gauges referenced in the commentary, the Dubai Financial Market General Index (DFMGI) and the FTSE ADX General Index (FADGI), reached their highest closing levels in roughly three months during the week ending June 19.
Once the memorandum-related news circulated, the DFMGI rose by about 9%, while the FADGI advanced around 6%. The scale of the move underscored how quickly UAE equities can reprice on shifting geopolitical expectations.
However, the rebound should be read in context. The commentary notes that the DFMGI had fallen nearly 23% from its pre-conflict peak to mid-March lows, following the escalation of regional hostilities and a temporary suspension of trading in early March. Since then, the index has recovered approximately 18%, but it remains about 9% below its pre-conflict high.
The FADGI showed a similar pattern. It declined about 13% from its pre-conflict peak before reaching mid-March lows. Since then, it has regained roughly 8%, but is still around 7% below its pre-conflict level.
From optimism to disappointment after the scheduled event
The initial enthusiasm appears to have softened after the anticipated signing event did not proceed as markets expected. By June 18, sentiment remained constructive, with both indices trading near their three-month highs ahead of the ceremony date. But on June 19, the DFMGI slipped by about 1.7%, and the FADGI fell around 1%.
Subsequent trading was also influenced by additional regional tensions over the weekend. When markets reopened on June 22, investor sentiment remained more cautious. Even so, both indices closed the session higher, with the DFMGI up 0.32% and the FADGI gaining 0.19%. The small gains, compared with the earlier rally, suggested investors were still calibrating risk and waiting for further clarity in the diplomatic process.
Foreign participation and trading activity remain key supports
Beyond headline risk, the commentary points to market structure and participation as potential stabilizers for the recovery. It highlights data indicating active foreign involvement in UAE equities and a rebound in trading activity.
On the Dubai Financial Market side, the commentary cites DFM data showing foreign investors accounted for 54% of total trading value during the first quarter of 2026. It also notes that 79% of new investor registrations during the period came from international markets.
On the Abu Dhabi Securities Exchange, trading activity reportedly increased 22% year-on-year, with foreign investors representing 47.5% of total trading value during the same quarter. The commentary also references a 56% year-on-year rise in DFM average daily trading value, framing liquidity improvements as part of the broader market recovery.
It is also worth noting that the commentary says the DFM surpassed the AED 1 trillion market capitalization milestone during the week. That achievement was presented as significant following earlier outflows earlier in the year.
What investors will watch next
While the rally lifted UAE indices toward three-month highs, the commentary emphasizes that both benchmarks are still trading below pre-conflict levels. That gap matters because it implies valuations have not yet returned to where they stood before the crisis worsened.
For investors, the near-term question is whether the rebound can be sustained beyond the initial pricing of diplomatic optimism. The commentary suggests markets will likely focus on the pace and durability of the diplomatic process, and whether it is sufficient to remove an “uncertainty premium” from valuations.
In practical terms, traders and portfolio managers typically look for follow-through signals in policy developments, continued engagement between parties, and any reduction in expectations for further escalation. Without those, rallies driven by headline momentum can fade quickly, particularly in markets where geopolitical developments are a dominant driver of risk sentiment.
For now, the message from the latest performance is mixed: UAE equities have shown they can rebound decisively, but investors remain cautious as geopolitical clarity remains incomplete.
