DUBAI (Bloomberg) -- For as long as Gulf economies rely on oil, crude will be a factor in determining how investors trade regional markets. But right now, politics is king.

In the past 12 months, tension between Saudi Arabia and Iran escalated, ties between Qatar and its neighbors were severed, rebels in Yemen fired rockets over Riyadh and Saudi Arabia started a crackdown on corruption that led to the arrest of high-profile businessmen and royals, including Prince Alwaleed bin Talal.

Rising geopolitical risks has impacted the way Middle Eastern investors react to oil prices, making shares in the six-nation Gulf Cooperation Council the most negatively correlated with crude since 2014, according to a Bloomberg index of the region’s major indexes. The stock gauge fell about 3% last year even after crude prices recovered to the highest level since 2015.

“It’s very difficult when the concern is geopolitics, because you just don’t know which way (the market) is going to swing,” said Max Wolman, a senior investment manager at Aberdeen Standard Investments in London. “So the best way to play at the moment is to reduce some exposure until there’s more clarity. We need to see some more positive signs coming out of Saudi Arabia and Iran” to return to the market, he said.

Here’s a guide to what investors should watch for in Middle Eastern markets in 2018:

Saudi Arabia

The kingdom is seeking to sell as much as 5% of Saudi Arabian Oil Co., better known as Aramco, in what could be the biggest initial public offering ever. And there’s anticipation that the country will be added to FTSE Russell’s emerging-markets index in March. Some strategists, such as  Mohamad Al Hajj at EFG-Hermes, sees inclusion in MSCI Inc. index in June.

Traders will also be monitoring the kingdom’s role in politics, especially given the war of words between Iran and Saudi Arabia, their proxy battles being fought in the Middle East, and the ongoing spat with Qatar. Saudi Arabia and a number of Arab nations cut ties with the gas-rich Gulf state in June, accusing it of supporting terrorism, a charge Qatar has denied.

And similar to 2017, investors will need to keep up with the pace of change domestically, including the fallout from value added tax. Last year, an anti-corruption committee stunned analysts with an unprecedented public purge, the government announced a new city called Neom that will be built on the Red Sea coast and the kingdom allowed short-selling of Saudi stocks.

Egypt

The government is moving forward with structural reforms that helped make the nation’s assets among the best performers in the Middle East. Foreign holdings of treasury bills was about $19 billion as of the end of November as authorities removed most currency restrictions and cut subsidies. The main stock gauge, the EGX 30 Index, advanced more than 20% in 2017, double its nearest Middle Eastern contender.

The central bank is seen cutting its key interest rate in 2018, according to  Khaled Darwish, an equity portfolio manager at CI Capital Asset Management in Cairo, and that will likely prompt more investors to opt for stocks over bonds. Healthcare, infrastructure and consumer shares have the most attractive valuations, he said.

Qatar

Shares from the gas-rich nation last year were at their cheapest level relative to emerging-market peers since 2010, as the boycott by its neighbors fueled the worst yearly performance in almost a decade. The spat also spurred a gap as wide as 7% between the onshore and offshore riyal rate.

Authorities said in December that there was evidence of manipulation with trading of the currency, and that the central bank has “ more than enough” reserves to defend the peg to the U.S. dollar. Local banks are “broadly resilient” because of the government’s support, said Aarthi Chandrasekaran, the V.P. for research at Shuaa Capital PSC in Dubai.

After two IPOs in Dubai and Abu Dhabi raised a combined $2.16 billion in the last quarter of 2017, Emirates Global Aluminium PJSC is weighing a dual listing in both markets. The company is jointly owned by Abu Dhabi’s Mubadala Investment Co. and the Investment Corp. of Dubai. Mubadala’s CEO Khaldoon Al Mubarak said in October that he expects the offering to take place in 2018.

Abu Dhabi is also working with banks to sell notes denominated in local currency for the first time in 2018, according to people with knowledge of the matter. For investors seeking protection against a rise in oil prices and the dollar, the emirate’s assets offer the “the best defense,” Hasnain Malik, the Dubai-based head of equities research at Exotix Partners LLP, said in an emailed note.

Investors will also be keeping an eye on the impact of VAT, which starts Jan. 1.

Kuwait

The nation could make it to MSCI’s watch list for inclusion into its emerging-market index after winning a place in FTSE Russel’s gauge, according to Simon Kitchen, the head of strategy at Cairo-based investment bank EFG-Hermes.

“Kuwait has made a lot of reforms that index providers require over the past year,” Kitchen said in an interview with Bloomberg Television on Dec. 20. “You have an economy that has always been robust and the most exciting in the region and you have a lot of money coming in to a market that is beginning to do the right things. And, more importantly, foreign and even regional investors have never really looked” at Kuwaiti assets seriously before, he said.

Amid the reforms underway, the exchange may start a new equities index after completing a reorganization of listed companies into different categories. The regulator has also issued a tender for advisory services for sale of a stake in the stock exchange.

Bahrain

The GCC’s smallest economy and a close Saudi ally may struggle to meet the growing demand for foreign currency or deal with the effects of worsening investor sentiment. “Financial support from neighboring sovereigns would be forthcoming,” S&P Global Ratings said in December when it cut the nation’s rating to B+, four levels below investment grade.

Bahrain’s equities are among the least traded in the GCC, but investors will have more options to buy shares of Bahraini companies as they cross-list in Dubai, said Issam Kassabieh, a Dubai-based equities analyst at Menacorp Financial Services. Khaleeji Commercial Bank started trading in Dubai in December, and Ithmaar Holding is waiting for approval from Bahrain’s central bank to list in the emirate.

Oman

Oman’s “external debt will exceed its liquid external assets for the first time next year, with the gap widening over the period to 2020,” said S&P in November. It’s one of three rating companies to lower the nation’s credit grade last year as Oman’s finances deteriorate. The yield on the government’s dollar bonds due in 2047 peaked at 6.62% in November.

The benchmark MSM 30 Index had the worst performance last year among gauges in the region after Qatar as companies struggled with tax increases, according to Joice Mathew, the head of equity research at United Securities in Muscat. Investors should see a gradual recovery in corporate earnings in 2018 mostly within the services and industrial sector, he added.