Stocks tumbled in Saudi Arabia last week as investors, spooked by protests taking place across the region, ran for the exits. The benchmark Tadawul All-Share Index (TASI) ended on 2 March down a sharp 15% from the previous week’s close at 5,323.27 points, which is the lowest level seen in almost two years. Around $57bn in value has been wiped off shares traded on the bourse, which is the MENA region’s largest, since the beginning of this year.

Nervousness about regional stability resulting from the deteriorating situation in Libya and the protests dotted throughout the MENA region eclipsed any positive sentiment from buoyant oil prices for the kingdom – the world’s largest oil exporter. Protests have already unseated long-time rulers in Tunisia and Egypt, and are threatening to do the same elsewhere.

Brent crude oil prices ended the week at around $114/B and WTI was over $100/B, staying firm as Libya descended into a virtual civil war, which is continuing to impact oil output and shipments. Colonel Mu'ammar al-Qadhafi and regime loyalists were hunkered down in Tripoli, but their hold on the rest of the country appeared to be loosening as opposition forces held on to the second largest city, Benghazi, and seized the key oil export terminal of Marsa al-Brega.

In Saudi Arabia, investors were not only reacting to events elsewhere in MENA, but also to small pockets of unrest within the kingdom itself. Minority Shi'ites staged protests in the Eastern Province towns of 'Awwamiya and Qatif on 3 March, a day after the stock market had closed, demanding the release of prisoners they allege are being held without trial. They continue to maintain that they face restrictions on securing senior government jobs. Last month they secured the release of three prisoners after a protest in 'Awwamiya. There have been calls on Facebook for further action in the kingdom, although whether this will gain any traction remains to be seen.

Stocks tumbled on other exchanges across the region, with the Shuaa Capital Composite Index slipping to an eight-month low of 2,603.42 points. The Kuwaiti benchmark index slumped to its lowest level in six years and the Dubai Financial Market index dropped to a seven-year low of 1,374. In Qatar the Doha index hit its lowest level since September last year.

In Bahrain, which had seen fervent protests that were brutally put down two weeks ago, before calmer heads prevailed, the situation was stabilizing. While the opposition group announced that they were ready to enter talks with the government, Bahrain’s benchmark index still continued to slide and closed at a nine-month low of 1,377.36 on 3 March. Fitch Ratings downgraded Bahrain’s sovereign ratings to A- (outlook negative) from A on 3 March, with the action on the sovereign mirrored by the downgrading of country’s sovereign wealth fund (SWF), Mumtalakat Holding.

Investors in the region are now, in many cases, more nervous than they were as the US subprime mortgage crisis unfolded, pushing down equities prices across the globe, and stability will need to return to the main hot-spots before investors make a meaningful return. However, there is also a sense that on some of the exchanges in less affected countries the selling has been overdone.

Meanwhile, the opening of the Egyptian stock market, which had been expected on 1 March, was postponed yet again. It had been shut for over a month, before which the benchmark index shed 16%. And when it reopens, selling is expected to resume. Trading was halted on 27 January as shares plummeted, due to the unrest that ultimately ousted long-time president Husni Mubarak. Officials were waiting for the banking system to return to normal before opening the exchange, and now that banks are operating properly experts have urged that the bourse should start up again.

There had been concern that the continued delay in the exchange’s opening could prompt Egypt to be excluded from the MSCI’s emerging market index, with investors suggesting that this could cause the market to lose its allure for international investors. However, after the 40th business day of closure, MSCI would enter a consultation process with regulators and exchange officials over whether to make a change and reclassify the country as a stand alone status, so the exclusion would not be automatic after a certain time period and would take into account the special circumstances in Egypt. The last time a country was ousted and given stand-alone status by MSCI was in 2008 (Pakistan).