London Daily

Focus on the big picture.
Monday, Jul 13, 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
World Cup Visitors Turn American Big-Box Stores Into Souvenir Stops
Netflix Weighs Always-On Channels, Bundles and Short-Form Video
Passenger Is Pulled Partly Outside Ryanair Jet After Window Fails Mid-Flight
Innovation-led growth strategy
Public service reform pressure
Defence and industrial security
Labour leadership transition and economic reset
Northern England Pushes for Greater Influence in Britain’s Future Economic Model
UK Technology Strategy Focuses on Life Sciences, Digital Innovation and Research Investment
Britain and United States Maintain Focus on Pharmaceuticals Cooperation and Industrial Growth
UK Public Services Face Continued Pressure as Government Promises Visible Improvements
Regional Economic Power Becomes Key Theme in Britain’s Next Political Phase
Britain Expands Support for Small Businesses as Firms Seek Better Access to Finance
UK Economy Remains Central Political Challenge as Cost of Living and Growth Concerns Persist
National Health Service Introduces New Workplace Reviews to Improve Conditions for Healthcare Staff
UK Life Sciences Sector Secures More Than Three Billion Pounds in Investment to Support Innovation
Britain Strengthens Defence Strategy as Security Concerns Reshape Military and Industrial Policy
Andy Burnham Promises Stronger UK Defence Industry and Expanded Domestic Production
UK Government Faces Difficult Spending Choices as Labour Leadership Transition Approaches
Rachel Reeves Warns Andy Burnham of Immediate Economic Challenges After Expected Leadership Change
Andy Burnham Prepares to Lead UK Government With Plans for Regional Power Shift and Economic Reset
Government Creates Emergency Support Scheme for Financially Struggling Universities
United Kingdom Replaces Traditional Farm Subsidies With Payments Linked to Environmental Performance
National Grid Reports First Week of Electricity Generation Without Fossil Fuels
United Kingdom Financial Regulator Introduces Tougher Capital Rules for Cryptocurrency Exchanges
Belfast Harbour Expands Operations to Attract Investment Through United Kingdom and European Union Market Access
Scottish Government Threatens Legal Challenge Over Westminster Cuts to North Sea Transition Funding
United Kingdom Accelerates Trans-Pennine High-Speed Rail Project Linking Northern Cities
United Kingdom Secures Ten Billion Pound Investment for Cambridge Quantum Computing Campus
Port Talbot Steelworks Wins Support for Green Hydrogen Transition and Protection of Industrial Jobs
United Kingdom Sends Royal Navy Carrier Strike Group to Indo-Pacific as Regional Security Focus Expands
National Health Service Expands Artificial Intelligence Diagnostics Across England to Reduce Screening Backlogs
United Kingdom Launches Fifty Billion Pound Infrastructure Fund to Accelerate Housing and Construction
UK Medical Chiefs Update Health Guidance to Promote Everyday Physical Activity
Office of Communications Keeps Wikipedia Under Review Under UK Online Safety Rules
UK Defence Ministry Expands Deep-Strike Capability Through Precision Missile Programme
Russell Group Universities Warn Funding Cuts Could Damage NHS Workforce Training
UK Parliament Calls for National Emergency Broadcast as Heatwave Conditions Intensify
UK and Netherlands Strengthen Naval Cooperation With New Amphibious Defence Partnership
UK Defence Ministry Joins International Missile Programme With One Hundred and Ninety Million Pound Investment
Bank of England Warns Middle East Conflict and AI Risks Could Pressure UK Economy
UK Government Introduces New Rules to Limit Foreign Influence in Political Donations
UK and France Prepare Naval Mission to Protect Shipping Through Strait of Hormuz
United States Pressures UK to Increase Defence Spending at NATO Summit
Bank of England Warns Artificial Intelligence Investment Boom Could Create Financial Stability Risks
Bank of England Begins Direct Oversight of Critical Technology Providers Supporting UK Finance
Andy Burnham Set to Become UK Prime Minister After Labour Leadership Race Clears Path to Downing Street
Scottish Fishing Industry Calls for Emergency Support Amid Rising Costs
UK Supports Stronger European Response to Russian Actions in Ukraine
Devon and Cornwall Police Release Suspect in Ann Widdecombe Murder Investigation
×