#todayinsight: Iran War Shock: Bond Markets Remain Resilient

Despite heightened geopolitical risks from the Iran conflict, Middle Eastern debt markets have remained surprisingly resilient. MENA bond and sukuk issuance reached about $114 billion by late July 2026, up 22% year on year, putting the region on track to approach last year’s $171 billion record. Credit risk initially increased, but CDS spreads later declined in several Gulf countries, with Saudi Arabia and Oman showing particular resilience.
Higher oil prices have also helped offset geopolitical risks by strengthening government finances. Oil prices had moved above the fiscal breakeven levels of Saudi Arabia, Kuwait and Iraq, while Bahrain remained more vulnerable. If the conflict becomes prolonged, the article suggests oil could remain around $90–$110 per barrel, providing further fiscal support to oil exporters.
For investors, the conflict may have created opportunities in GCC bonds. Short-term GCC bonds offered an average spread of about 85 basis points over comparable US Treasuries, versus roughly 53 basis points for the broader emerging-market index. The article particularly highlights high-quality GCC banks, where wider credit spreads may offer attractive returns. If geopolitical tensions stabilize and economic fundamentals remain strong, these spreads could narrow, potentially generating capital gains for investors.