UAE equity markets logged their strongest weekly performance in months as investors shifted toward risk-on positioning on optimism related to potential diplomacy between the United States and Iran. By mid-week, both of the region’s main benchmark measures reached their highest closing levels in roughly three months, according to market data referenced by eToro analyst commentary.
Indices hit three-month highs, but remain below pre-crisis peaks
The Dubai Financial Market General Index (DFMGI) and the FTSE ADX General Index (FADGI) rose toward three-month highs after reports emerged that the two countries had agreed a memorandum of understanding intended to end the conflict. A formal signing ceremony was initially described as scheduled for June 19 in Switzerland.
Reaction was immediate. From the time the agreement was reported, the DFMGI gained approximately 9%, while the FADGI advanced around 6%. The size of the move reflected how quickly regional markets have been reacting to geopolitical developments, where expectations can translate into trading activity within days.
Even so, the rebound has not erased earlier losses. The DFMGI had fallen nearly 23% from its pre-conflict peak to its mid-March lows after regional hostilities escalated and trading was temporarily suspended in early March. Since then, the index recovered roughly 18%, but it still traded about 9% below its pre-conflict high.
The FADGI followed a similar path. It declined about 13% from its pre-conflict peak to its mid-March trough, later recovering around 8%. It remains approximately 7% below its pre-conflict high.
Headlines drive trading, analyst says; momentum fluctuates
eToro’s regional market analyst, Nagham Hassan, framed the move as evidence that investor demand continues to exist, even when markets are largely reacting to news flow rather than stable fundamentals in the short term. In commentary shared with media, Hassan said that UAE markets have “essentially been trading the headlines” since the conflict began, but that the “speed and scale” of the recent rally points to genuine appetite among investors.
The period also illustrated how quickly sentiment can shift when expectations are not met. By June 18, both indices were trading near three-month highs ahead of the anticipated signing ceremony. However, market momentum weakened after the event did not proceed as expected.
On June 19, the DFMGI fell about 1.7% and the FADGI dropped around 1%. Then, after additional regional tensions over the weekend, the tone remained more cautious when markets reopened on June 22. Even so, both indices finished the session higher, with the DFMGI up 0.32% and the FADGI up 0.19%, though conviction was described as more restrained.
Foreign participation and market liquidity support the recovery narrative
While geopolitics influenced near-term price action, the commentary also pointed to activity indicators that may help explain why a sustained rebound could still be possible. The DFM surpassed the AED 1 trillion market capitalisation milestone during the week, a notable milestone after earlier in the year the market had experienced substantial outflows.
eToro’s commentary cited DFM data showing that foreign investors represented 54% of total trading value during the first quarter of 2026. It also stated that 79% of new investor registrations came from international markets. For the Abu Dhabi Securities Exchange, trading activity increased 22% year-on-year over the same period, while foreign investors accounted for 47.5% of total trading value. Average daily trading value on the DFM rose 56% year-on-year.
Hassan said the data points to strong international interest in UAE equities, adding that the market’s next step depends on greater certainty around the diplomatic process and a durable resolution that can reduce the uncertainty premium affecting valuations.
What to watch next: diplomacy clarity and risk pricing
From an investor perspective, the key issue is not only whether the initial rally can extend, but also how quickly risk pricing adjusts. With both benchmarks still below pre-crisis levels, markets are effectively working through an overhang of earlier uncertainty.
Going forward, traders and portfolio managers are likely to focus on whether subsequent diplomatic steps translate into a credible timeline and implementation, rather than intermittent headlines. In parallel, continued foreign participation and improving liquidity metrics could help support drawdowns from earlier losses being gradually recovered.
For now, the three-month highs signal renewed buying interest, but the path back to previous peaks appears contingent on steadier geopolitical conditions and less market sensitivity to event timing.
