Dubai: Dubai’s shock alert of possible debt default will send Gulf markets, mainly in Dubai and Abu Dhabi, plunging when they resume trading this week after a holiday weekend, economists predicted on Sunday.

“I expect to see a drop in Dubai’s market when it opens on Monday...a minimum of 2-3%,” Saudi financial analyst Ali Daqaq said. “The banking sector will be the hardest hit, due to exposure to loans, and the danger of default on this debt,” he said.

All Gulf stock markets have been on a long Muslim feast holiday since Thursday, sparing them the impact of Dubai’s announcement that it will seek a freeze on debt repayments for its debt-laden Dubai World conglomerate.

The news sent jitters throughout Asian and European stock markets on Thursday and the US market on Friday as investors saw in a possible default by Dubai and its quasi-state companies—liable for some $80 billion (Rs3.74 trillion today)—a looming worldwide debt crisis.

But the break given to Gulf markets since the announcement was made late Wednesday might reduce the impact on those bourses as the first shock was absorbed by the global markets, economists said.

“I expect the reaction here to be less hard because the first shock was absorbed by the global markets,” said Emirati economist Nasser bin Ghaith.

Dubai and Abu Dhabi will be the only Gulf stock markets to open on Monday, while Kuwait’s follows on Tuesday. Saudi Arabia’s financial market will remain on holiday until Saturday.

The markets of Dubai and Abu Dhabi will, however, have only two days of trading to react to the new announcement before they go again on holiday until 6 December, on the occasion of the national day.