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Qatar Stocks Plunge, Oil Slips After Saudi Arabia And Other Arab Countries Cut Ties

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Qatari stocks took a nosedive on Monday after Saudi Arabia and four other Arab countries cut ties with the tiny Gulf state over allegations that it was supporting terrorism.

Qatar's benchmark index sunk more than 7% to its lowest levels in more than a year. All 44 stocks ended the day in the red.

Saudi Arabia, the United Arab Emirates, Bahrain, Egypt and Yemen broke diplomatic ties after accusing the country of backing terrorism. The Qatari government denied any involvement and said the move was "unjustified."

The nations also severed some commercial ties, including the closure of their borders, airspace and seaports. Big Middle Eastern airlines like Emirates, Etihad and Fly Dubai said Monday they would halt flights out of Doha, the capital of Qatar and a regional transportation hub.

The heightened tension stoked concerns about the future of oil prices and a deal on production cuts among the neighboring countries. Qatar is the world's largest producer of liquefied natural gas and is a member of oil cartel OPEC.

While the move initially sent oil prices up, those gains were soon wiped out, with a barrel of crude falling nearly 1% to $47.28. Energy companies like Gas Transport Company and Qatar Fuel were among the hardest-hit Qatari stocks.

“We certainly would encourage the parties to sit down together and address these differences,” said U.S. Secretary of State and former CEO of ExxonMobil Rex Tillerson from a news conference in Australia.

If the breakdown in relations persists, Qatar could be looking at a slowdown in economic growth (its construction boom is dependent on an overland supply chain) and rising food prices (a large portion of its food is imported through Saudi Arabia). Qatar is also scheduled to host the World Cup in 2022.