Middle East Bond Risk Premiums Reach Highest Level Since 2022
The risk premium on sovereign bonds in the Middle East has increased by 20 basis points to reach 402 basis points above U.S. Treasury yields, the highest level since 2022, amid rising geopolitical tensions in the region. This came after a warning from U.S. President Donald Trump regarding the potential end of the ceasefire agreement, leading to a shift in investor outlook from optimism about development projects to heightened risk assessments due to renewed fighting between Iran and the United States and ongoing Iranian attacks on ships in the Strait of Hormuz. The tensions have increased financial pressures on Gulf countries, with the performance of dollar bond markets in the region declining, as governments are required to pay higher yields to attract investors compared to other emerging markets.
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