European stocks rose to near their highest levels on Tuesday, supported by strong gains in Genmab shares, which led the rise in health care stocks, while euro zone bond yields fell after a rally driven by financial and inflationary fears.
The European Stoxx 600 index rose 0.8 percent to 638.41 points by 07:27 GMT, heading towards recording a third consecutive session of gains, according to Reuters.
Genmab stock jumped 7.6 percent, topping the gains of the STOXX 600 index, after an advanced study showed that the leukemia treatment combination developed by the Danish biotechnology company in cooperation with the American pharmaceutical company AbbVie reduced the risk of disease progression or death.
The broader health care sector index rose 1.6 percent.
Later Tuesday, attention will turn to retail sales data in the euro zone and the Standard & Poor's Global survey of the private sector in Britain, which may provide indications of the levels of consumer spending in the region and the activity of the British economy.
The euro stabilized near its lowest level in 17 months, affected by political uncertainty after Spanish Prime Minister Pedro Sanchez called, on Monday, for early elections.
In France, the government is seeking to pass the unpopular 2027 budget to reduce the budget deficit, which led to a widespread selling wave in the bond market.
However, euro zone bond yields fell after last week touching multi-decade highs.
In other stocks, the Italian company Technoprop rose by 2.3 percent, after JP Morgan began covering the stock with an “overweight” recommendation.
The Saudi economy is heading for a strong rebound in 2027 as the repercussions of the energy and trade disruptions subside. The World Bank expects the Kingdom’s gross domestic product to grow by about 7.9 percent next year, after an expected contraction of about 2 percent during 2026, at a time when the Strait of Hormuz crisis has shown that diversifying sources of growth is no less important than diversifying energy export paths and logistical infrastructure.
In an interview with Asharq Al-Awsat on the occasion of the issuance of the latest World Bank report on economic developments in the region, the chief economist for the Middle East, North Africa, Afghanistan and Pakistan at the World Bank, Roberta Gatti, told Asharq Al-Awsat that Saudi Arabia and the UAE were able to overcome the effects of closing the Strait of Hormuz better than some neighboring exporting countries. Thanks to them having alternative ways to export energy. She explained that Saudi Arabia redirected a large volume of oil exports via the “East-West” pipeline to the Red Sea ports, while the UAE’s ability to export hydrocarbons through Fujairah helped reduce its dependence on the strait.
Ghati believes that the crisis has strengthened, rather than weakened, the importance of economic diversification, but at the same time it has revealed another dimension of flexibility, which is the diversification of export paths. In her opinion, the diversification of economic and financial activity across different income sources and sectors must be accompanied by the diversification of trade routes, export infrastructure, and logistics networks.
This comes at a time when the World Bank expects the economy of the Middle East, North Africa, Afghanistan and Pakistan region to contract by about 2.1 percent in 2026, compared to a growth of 3.3 percent in 2025, while the economies of the Gulf Cooperation Council countries collectively are heading towards a contraction of 4.3 percent, in one of the most severe shocks to which the region has been exposed since the “Covid-19” pandemic. On the other hand, the World Bank expects regional growth to rebound strongly to 7.8 percent in 2027, if the conflict recedes and trade and export flows gradually return to normal, driven mainly by the restoration of production and export of hydrocarbons.
Saudi Arabia and flexibility
Ghati says that the conflict demonstrated a set of strengths that strengthened the ability of the Saudi economy to absorb the shock, most notably the large financial reserves, the continuation of economic diversification efforts, and the ability to redirect an important portion of oil exports through the Red Sea ports. These factors contributed to maintaining a degree of resilience to disruptions in trade and energy flows, compared to what the repercussions would have been in the absence of these alternatives.
It explains that the Kingdom's ability to diversify export routes was an important factor in reducing the impact of the Hormuz disruption, while the path of the economy during the coming period reflects the importance of continuing to invest in this flexibility. According to the latest World Bank forecasts, the Saudi economy is expected to contract by about 2 percent in 2026, before strongly regaining its momentum and growing by about 7.9 percent in 2027 as trade and energy flows gradually return to normal.
Ghati confirms that the performance of the economy would have been more affected had it not been for the existence of alternative export routes, especially through the “East-West” pipeline and the Red Sea ports.
The “Hormuz” shock hits Gulf exports
Ghati points out that the disturbance in the Strait of Hormuz had a significant impact on the World Bank’s growth forecasts. Regional output is expected to contract by 2.1 percent in 2026, a decrease of 5.7 percentage points from growth expectations that preceded the outbreak of the conflict in January.
This decline is largely due to the severe turmoil affecting oil and gas exporters in the Gulf, as the World Bank expects a contraction in all the economies of the Gulf Cooperation Council countries except the Sultanate of Oman during 2026.
The crisis led to a decline in the movement of oil tankers in the Gulf by more than half, and oil production in the region declined from about 26 million barrels per day to 16 million barrels per day in March.
Despite the magnitude of the shock, its global repercussions were more contained than would have been the case with a similar supply shortage. A previous surplus in the oil market, the redirection of some shipments outside the Strait, increased production in other regions, drawdowns on inventories, and reduced demand in East Asia helped absorb part of the shortfall.
But the differences between the economies of the Gulf countries were great. Countries most dependent on the Strait of Hormuz experienced larger declines in production, while alternative export routes in Saudi Arabia and the UAE helped limit the impact of the shock.
The World Bank expected the Qatari economy to contract by about 20.9 percent in 2026, the Kuwaiti economy by 14.6 percent, the Iraqi economy by 12.4 percent, and the Bahraini economy by 2.9 percent, at a time when the unrest affecting tourism, aviation, and logistics services added other burdens on economic activity.
Strong rebound in 2027
Ghati believes that the main channel through which the shock was transmitted to the Gulf economies was the decline in the volume of exports, in addition to the damage to infrastructure. If trade routes return to normal and energy exports resume, a large portion of the lost output is expected to be restored relatively quickly, which explains expectations of a strong rebound in 2027. As for Saudi Arabia, the World Bank expects the economy to grow by 7.9 percent next year.
But Gatti stresses the need to distinguish between recovery and recovery. Following a sharp decline in production, there is often a rapid rebound that reflects the restoration of production from low levels, and not necessarily a corresponding improvement in basic indicators or productivity.
According to the World Bank's basic scenario, the report assumes the continuation of the conflict until the end of 2026, followed by a de-escalation and a gradual return of trade to normal. Accordingly; Regional growth, excluding Iran, is expected to rise to 7.8 percent in 2027 as export flows return.
But repairing damaged infrastructure may take time, investments may remain on hold amid uncertainty, and financial reserves are weaker than before the crisis.
Gatti warns that rising shipping costs, declining investor confidence, falling tourism revenues, weak global demand, and tightening financing conditions could prolong the economic impact of the conflict beyond the end of the immediate disruptions.
Long periods of uncertainty may delay investments, weaken business confidence, and slow the accumulation of physical and human capital. This increases the risk that the temporary shock will turn into a permanent slowdown in growth.
The Gulf maintains a cost advantage
Despite the severity of the shock, Ghati believes that the economies of the Gulf Cooperation Council countries still have an important structural advantage, as they are among the lowest cost and most competitive in oil and gas production in the world.
As trade flows return to normal, these economies will, in their estimation, be well positioned to remain an important supplier to global markets. But the policy challenge is not limited to restoring economic activity in the near term, but rather extends to continuing to diversify economies, enhance their ability to withstand, and protect human and productive capital during the crisis.
Gati says these investments are necessary to ensure that temporary disruption does not turn into a permanent loss of growth potential.
Artificial Intelligence...the new diversification of productivity
In parallel with the energy crisis, Ghati believes that artificial intelligence can open a new source of growth and productivity in the region, but benefiting from its potential requires addressing three main gaps: localization, use, and basic capital, in addition to enhancing the dynamism of the private sector.
She explains that weak investment, training and innovation, as well as state dominance in some economies, corruption and political instability, limit the ability of companies to adopt technology and transform it into broad productivity gains.
A gap in the artificial intelligence system
The localization gap highlights the importance of data and local languages; Although Arabic is spoken by more than 500 million people, it represents less than 1 percent of global URLs, while local dialects remain a weak point in Arabic language models.
The two gaps in utilization and core capital are limited productive adoption of AI, a lack of digital skills, and uneven infrastructure. The region performs below the OECD average in innovative thinking, while mobile broadband subscriptions in eight economies, including Egypt, Iraq and Pakistan, are below the level expected according to their income.
Saudi Arabia and a growing regional role
According to Ghati, Saudi Arabia stands out as one of the most advanced artificial intelligence environments in the region. It rose from 33rd place among 36 economies in 2017 to 19th place in 2024 according to the Stanford Global Index of Artificial Intelligence Vitality.
It believes that the real test is to transform large investments in data centers and infrastructure into widespread adoption by companies, workers and public institutions, which will be reflected in productivity and growth of non-oil sectors. Saudi Arabia can contribute to building a regional artificial intelligence system through computing capabilities, data centers, and model development, while developing economies provide talent, sectoral expertise, and local data.
Regional cooperation is an opportunity to enhance flexibility
Ghati believes that the greatest risk to the 2027 prospects is the continued disruption of trade and energy flows, which may put pressure on investment, logistics services, tourism, and business confidence and delay recovery.
On the other hand, the crisis represents an opportunity to accelerate regional cooperation, especially in artificial intelligence. Gulf countries have the infrastructure and computing capabilities, while other economies have talent, data, and innovation. This integration can create new sources of growth, raise productivity, and enhance economic flexibility outside the oil cycle.
As for Saudi Arabia, Ghati believes that the Hormuz experience demonstrated the importance of combining economic diversification with trade and export routes. With the Saudi economy expected to grow by 7.9 percent in 2027, the opportunity lies in transforming the post-shock production rebound into more sustainable growth led by productivity, investment, and non-oil sectors, while continuing to strengthen the commercial and export infrastructure capable of facing future shocks.
