Saudi Aramco Faces Tough Test Less Than a Month After IPO

Saudi Aramco’s status as an oil-producing behemoth located in one of the world’s most turbulent regions always marked it as likely to suffer bouts of volatility.  But few could have expected the stock to face so stern a test less than a month after the company’s historic $25.6 billion initial offering.

The world’s most profitable company extended declines Monday after dropping to its lowest closing price yet a day earlier…

as the U.S. killing of Iran’s most prominent general last week triggered fresh concern of a wider conflict in the Gulf region. The move suggests that rising oil prices — Brent crude has climbed above $70 a barrel for the first time since May on a closing basis — aren’t necessarily a boon for the energy giant.

Aramco fell 0.1% to 34.50 riyals on Monday, narrowing its gain since it listed on Dec. 11 at 32 riyals to 7.8%. It tumbled 1.7% Sunday.

While Aramco has performed better than Saudi Arabia’s benchmark Tadawul index this week, the sudden rise in geopolitical tension comes just as the end of the stabilization period for the shares nears.

“The risks will remain over the near term as both the United States and Iran aim threats at one another,” said Jameel Ahmad, a markets analyst at FXTM in London. The drop in Aramco shares “is a natural reaction to the coordinated risk aversion that has swept global sentiment since the events at the end of last week.”

The missile attack that killed Iran’s General Qassem Soleimani in Iraq, ordered by U.S. President Donald Trump, was a reminder of the risks of investing in the region. In September, Saudi Arabia’s oil production was cut by half after a swarm of explosive drones struck some of its most important production facilities. The U.S. and Saudi Arabia blamed Iran for the attack, while Yemen’s Houthi rebels claimed responsibility.

Aramco was back pumping 9.9 million barrels a day just one month after the attacks and the company pressed ahead with what was to be the world’s biggest IPO.

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At the time of the sale, many foreign investors cited geopolitical risk as reasons to stay away from the shares, and considered them too expensive. Even after this week’s fall, Aramco has a valuation of $1.8 trillion, easily the highest among listed companies.

Aramco still has some built-in protection because the shares are mostly in the hands of those used to regional politics, mitigating selling pressure at times of tension. Saudi government institutions invested almost…

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