London Daily

Focus on the big picture.
Friday, Sep 11, 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
English Councils to Gain Power to Introduce Tourist Taxes by 2028
Kemi Badenoch Reshuffles Conservative Shadow Cabinet
Firefighters Make Progress Containing Major Wildfires in South Wales
John Lewis Partnership Reports £124 Million Loss
Study Says UK AI Data Centres Will Create Only a Quarter of Forecast Jobs
UK Government Considers Higher Industrial Water Prices Amid Supply Pressures
Andy Burnham Holds First Call With Donald Trump as UK Prime Minister
NHS Records Busiest Summer on Record as Heatwaves Drive Hospital Admissions
Home Secretary Orders Police Crackdown on Far-Right Anti-Migrant Vigilantes
UK Supreme Court Rules Northern Ireland Religious Education Curriculum Breaches Human Rights Standards
Markets Price in Four Bank of England Rate Rises by Next Summer
House of Commons Prepares Free Vote on Assisted Dying Bill
UK Government Bans Trade With Israeli Settlements in Occupied Territories
UK Economy Grows 0.4% in July as Artificial Intelligence Investment Supports Expansion
Andy Burnham Becomes UK Prime Minister After Keir Starmer Resigns
John Lewis Partnership Loss Widens to £124 Million
UK Government to Put White Working-Class Social Mobility at Centre of Equality Policy
McLaren Plans £450 Million Technology Investment Creating 1,000 UK Jobs
UK Chancellor Faces Calls for Wealth Taxes and Public Ownership in Autumn Budget
English Mayors to Gain Powers to Impose Uncapped Overnight Tourist Taxes
JPMorgan’s Jamie Dimon Warns UK Government Against Bank Windfall Taxes
UK Air Traffic Control Outage Cancels More Than 2,000 Flights
UK Imposes Trade Ban on Israeli Settlements in the West Bank
UK Borrowing Costs Surge as Middle East Tensions Push Long-Term Gilt Yields to Highest Since 1998
Buckingham Palace Says Prince Harry and Meghan Will Not Resume Official Royal Duties
UK Treasury Faces Calls to Scrap £100,000 Childcare Support Threshold
Trades Union Congress Urges Labour Government to Rewrite Migration Policy
Riot Police Deployed After Anti-Migrant Protests Turn Violent in Portsmouth
UK Considers Replacing Some Disability Cash Payments With Direct Services
JPMorgan’s Jamie Dimon Warns UK Chancellor Against Higher Banking Taxes
UK Announces New Sanctions Targeting Israeli Settlements in West Bank
Metropolitan Police Investigate Alleged Illegal Donations to Reform UK
UK Charges Wiltshire Man With Assisting Russian Intelligence
UK Orders Urgent Review After Air Traffic Failure Cancels More Than 2,000 Flights
Merz Rebukes AfD Expansion in Saxony-Anhalt
King Charles Confirms Prince Harry and Meghan Will Remain Private Citizens
Labour Selects Former Child Refugee for By-Election in Keir Starmer’s Former Seat
Foreign Private Equity Accelerates Takeovers of London-Listed Industrial Companies
NHS Maternity Care Faces Scrutiny Over Support for Mothers After Caesarean Births
BBC Warns Staff Strikes Are Likely Amid Job Cuts and Programme Cancellations
English Housing Affordability Improves to Best Level in More Than a Decade
UK Health Commission Proposes Framework for Wider AI Adoption Across NHS
Labour Faces Pressure for Wealth Tax Ahead of Autumn Budget
Metropolitan Police Open Criminal Investigation Into Alleged Foreign Donations to Reform UK
UK Police Deploy Riot Officers After Anti-Immigration Unrest in Portsmouth and Dover
UK Defends Sanctions on Israeli Settlements Despite Diplomatic Retaliation
UK Air Traffic Control Failure Cancels More Than 1,000 Flights and Disrupts 65,000 Passengers
Compass Urges £10 Million Wealth Tax and Public Ownership Ahead of UK Autumn Budget
UK Government’s Devolution Plans Face House of Lords Scrutiny
Maldives Seeks New Chagos Sovereignty Talks With UK Prime Minister Andy Burnham
×