London Daily

Focus on the big picture.
Friday, Apr 03, 2026

Myriad risks for Middle East markets could wrongfoot investors

Myriad risks for Middle East markets could wrongfoot investors

Lebanon’s debt crisis, a debt test in Oman, low oil prices, and giddy Saudi stock valuations among risks.

From parliamentary gridlock in Kuwait to paralyzed debt talks in Lebanon and giddy valuations for Saudi Arabian stocks, investors in the Middle East face a raft of risks in the fourth quarter.

Ever-present is the fact that current crude prices can’t balance the budgets of most of the region’s energy exporters.

Here are six risks to watch in the last three months of the year:

Oil Blow


While derivative traders have pared bets that Gulf states will be forced to devalue their currency pegs in the next 12 months, bouts of volatility may return.

Countries that have been financing deficits through debt sales “may be in trouble if oil prices persist at current levels,” said Peter Kisler, a London-based portfolio manager at hedge fund North Asset Management. “2020 is an exceptional year, and they can get away with it now, but I am not sure they have a viable long-term plan if oil prices don’t return to pre-2020 levels.”

Debt sales from the region hit a record in the past quarter as governments rushed to place bonds after the coronavirus shock.

Looking Dear


In equity markets, most Gulf Arab nations have outperformed their emerging peers in the last three months. What’s shaping up to be their worst recession on record could leave them exposed.

“Stock-market valuations, for example in Saudi Arabia, remain elevated and somewhat detached from the underlying economic prospects,” said Tarek Fadlallah, the Dubai-based chief executive officer of the Middle East unit of Nomura Asset Management.

Debt Test


Oman is planning its first Eurobond sale in more than a year, despite the threat its credit ratings could slide deeper into junk.

“The biggest concern in Oman is that it fails to deliver convincing fiscal reform, which would undermine its debt-market access at a time of exceptionally large funding needs,” said Jan Friederich, a Hong Kong-based senior director with Fitch.

Oman also lacks a backstop credit line from its regional allies. Spreads on some of the sultanate’s securities have stabilized after briefly surpassing 1,000 basis points versus U.S. Treasuries, a threshold for debt to be considered “distressed,” in the first half of the year.

Other countries in the region that have a negative outlook on their ratings include Iraq, Jordan and Morocco.

Gloomy Debut


Kuwait joins the MSCI Emerging Markets Index in November under a cloud of uncertainty.

Parliamentary opposition to a law that would allow the government to borrow has prevented it from raising debt, even as it faces the highest budget deficit in its history. Sheikh Nawaf Al-Ahmed Al-Jaber Al-Sabah, 83, was sworn in Wednesday as the ruling emir, following the death of his half brother. The nation also holds parliamentary elections later this year.

“Kuwait will have to contend with uncertainty around its election, succession concerns, expensive valuations and the inevitable hangover once the index inflows related to the emerging-market upgrade recede,” said Hasnain Malik, the Dubai-based head of equity strategy at Tellimer.

On Hold


Lebanon’s inability to form a new government has pushed back the prospect of a deal to restructure the country’s debt after the nation defaulted on about $30 billion of Eurobonds in March. Its debt was the worst-performer in emerging markets in the third quarter.

“Progress with debt restructuring will require greater unity among political and economic elites, the prospects for which remain very uncertain despite the severe deterioration in economic conditions and the conditional help on offer from international institutions,” said Friederich at Fitch.

Biden, Iran


Since taking office, U.S. President Donald Trump has sought to build a unified coalition in the region against Iran. Accords establishing diplomatic relations with Israel and the United Arab Emirates and Bahrain have done little to boost markets, but the potential geopolitical impact could unnerve investors.

“The outcome of the election will matter with regards to policy towards Iran and a potential weakening of the Trump administration’s strong support for the region in light of a Biden victory,” said Mohammed Elmi, a London-based emerging-market portfolio manager at Federated Hermes, which manages almost $630 billion.

Newsletter

Related Articles

0:00
0:00
Close
Trump’s Strategic Pressure on UK Seen as Push for Stronger Alignment and Fairer Terms
UK Focuses on Trade Finance to Secure Critical Materials for Defence and Energy Sectors
Majority of UK Businesses Hit by Middle East Conflict While Confidence Holds Firm
UK Royal Navy Faces Renewed Scrutiny as Debate Intensifies Over Capability and Readiness
Reform UK Faces Mounting Distractions as Policy Agenda Struggles to Gain Traction
Investigation Launched Into Northern Cyprus IVF Clinics After UK Families Receive Incorrect Sperm
International Meeting Issues Unified Call to Safeguard Navigation Through Strait of Hormuz
Potential Strait of Hormuz Closure Raises Concerns Over UK Food and Medicine Supply Chains
UK Leads Coalition of Over Forty Nations Urging Iran to Reopen Strait of Hormuz
UK Secures Tariff-Free Access for Medicines in Landmark US Pharma Trade Agreement
King Charles III Invited to Address Joint Session of U.S. Congress in Rare Diplomatic Honor
Debate Grows Over Whether Expanded North Sea Drilling Can Reduce UK Energy Bills
UK Faces Heightened Risk of Jet Fuel Shortages, Airline Chief Warns
UK Ends Police Investigations into Lawful Social Media Posts After Review Finds Overreach
Abramovich Moves to Establish Charity for Frozen Chelsea Sale Proceeds Amid UK Dispute
Starmer Reaffirms NATO Commitment While Responding to Trump’s Strategic Critique
UK Aid Reductions Raise Fears of Severe Human Impact Across Parts of Africa
UK Signals Renewed Push for EU Cooperation as Iran Conflict Reshapes Security Landscape
Bank of England Signals Caution as Bailey Advises Markets Against Expecting Rate Hikes
UK to Convene Global Coalition to Restore Shipping Through Strait of Hormuz
Trump Signals Possible NATO Reassessment, Emphasizes Stronger U.S. Strategic Autonomy
Australia Joins British-Led Efforts to Reopen Strait of Hormuz Amid Escalating Tensions
King Charles Plans US State Visit as UK Strengthens Ties with Trump Leadership
UK Regulator Launches Investigation Into Microsoft’s Business Software Practices
Kanye West Set for High-Profile Return to UK Stage at Wireless Festival
Trump Presses Europe to Strengthen Commitment as Iran Conflict Escalates
UK to Deploy Additional Troops to Middle East Amid Rising Regional Tensions
UK Authorities Face Claims of Heavy-Handed Measures in Monitoring Released Pro-Palestine Activists
Trump Calls on UK to Secure Its Own Energy as Iran Conflict Intensifies
Nigel Farage Declines Invitation to UK Conservative Conference Led by Liz Truss
Trump Warns Allies to Take Responsibility as Rift Deepens with UK and France Over Iran Conflict
How Britain’s Prime Minister Controls U.S. Bomber Access in Escalating Iran Conflict
Trump Urges Allies to Secure Their Own Oil Supplies as Hormuz Crisis Disrupts Global Energy
Russia Expels British Diplomat as UK Pushes Back Against Pressure
White House App Faces Scrutiny After Claims of Continuous User Location Tracking
BBC Faces Scrutiny Over Allegations of Paid Content Linked to Saudi Arabia
UK-France Coastal Patrol Agreement Nears Breakdown Amid Migration Pressures
UK Police Detain Pro-Palestine Activist Again Weeks After Bail Release
FTSE 100 Advances as Energy and Mining Shares Gain Amid Middle East Tensions
Eli Lilly Seeks UK Pricing Deal to Unlock Renewed Pharmaceutical Investment
Three Arrested in UK After Massive Cocaine Haul Discovered Hidden in Banana Shipment
UK Fuel Prices Poised for Further Surge Amid Global Energy Pressures
Apple Subsidiary Penalized by UK Authorities for Breach of Moscow Sanctions
Western Allies Intensify Coordinated Sanctions Strategy Against Russia
UK Lawmakers Face Criticism Over Renewed Push for Social Media Restrictions
Starmer Signals UK Crackdown on Addictive Social Media Features
Rising Costs Push One in Five UK Hospitality Businesses to the Brink of Closure
Man Arrested on Suspicion of Attempted Murder After Car Strikes Pedestrians in UK, Injuring Seven
Escalating Conflict Involving Iran Tightens Fiscal Pressures and Highlights UK Economic Vulnerabilities
UK Moves to Confront Russian ‘Shadow Fleet’ Operating in Its Waters
×