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Gulf stock markets edged lower this week, with investors holding back ahead of Federal Reserve Chair Jerome Powell's much-anticipated Jackson Hole speech about the future of US interest rates.

What does this mean?

Gulf exchanges move in step with US monetary policy because most regional currencies are pegged to the US dollar. That link leaves Gulf stocks especially sensitive to decisions from the Fed, and right now, the region's investors are taking a cautious approach. Qatar's main index sank 0.6%, with notable falls for Qatar National Bank and Qatar Navigation. Saudi Arabia's Tadawul slipped as well, weighed down by declines in Saudi Basic Industries and Aramco. Dubai's market lost a bit of ground too, even after Emirates NBD launched a $139 million dim sum bond. Abu Dhabi was the outlier, seeing a modest uptick on gains from Multiply Group and Aldar Properties. Bottom line: uncertainty about the Fed's rate plans has kept traders on the sidelines, leading markets to drift.

Because Gulf currencies are linked to the dollar, any decision from the Federal Reserve filters quickly through to local markets. When US rates rise, borrowing becomes costlier and investors tend to pull back, adding extra volatility. With Jackson Hole looming, volumes have thinned and swings have picked up, showing that traders are waiting for clarity before taking the plunge.

The bigger picture: International decisions set the tone for regional growth.

Fed decisions don't just move US markets - they set off ripples worldwide. When US interest rates climb, global investors may shift money into dollar assets, putting extra pressure on Gulf economies that rely on competitive exports and stable funding. Even as the Gulf region looks to diversify, it remains tightly bound to policy shifts made thousands of miles away.