Gulf Crisis: sovereign bonds under pressure amid military attacks and rising oil prices
The geopolitical crisis in the Gulf is putting sovereign bonds in the region under severe pressure.
Despite the rise in oil prices above $72 per barrel, which supports fiscal fundamentals, geopolitical instability is significantly increasing the risk premium on sovereign debt. The TASI in Saudi Arabia gained +0.7%, supported by Saudi Aramco and SABIC, while the QSI in Qatar closed down -0.7% due to the suspension of LNG production.
In the UAE, markets remained closed by decision of the regulatory authorities, in Bahrain the force majeure declaration by Aluminium Bahrain reflects the ongoing economic disruption, and Kuwait suffered intense attacks with casualties.
Since March 1, 2026, a U.S.-Israeli military campaign against Iran has triggered direct retaliations against Saudi Arabia, Qatar, the UAE, Kuwait, and Bahrain, with hundreds of missiles and drones launched at critical energy infrastructure, including the Saudi Ras Tanura refinery and energy sites in Qatar.
Overall, Saudi Arabia appears more resilient, while Qatar, the UAE, Bahrain, and Kuwait face elevated sovereign risk in this extraordinary context.
Benedetta Zimone
UCapital Asset Management LLP or group companies may have commercial relationships with the companies mentioned. This content is not financial advice.
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