There’s little or nothing to put your money into in Iran or Syria, and countries like Egypt and Tunisia are struggling to win investors back after their Arab Spring uprisings last year. But geopolitical risk is also seeping into other countries in the Middle East.
Lebanon is looking a tricky bet, as the country has seen clashes between supporters and opponents of the uprising against Syrian President Bashar al-Assad and the border region has been used by rebels to smuggle arms into Syria and take refuge from Syrian troops.
Farouk Soussa, Middle East economist at Citi in Dubai, says:
Syria is having a very big impact on people’s perceptions of risk in Lebanon. There is an increasing risk that if we do have regime change in Syria, it could mean change in Lebanon.
Yields on Lebanese debt, which appears in flagship bond indices tracked by many investors, have hit their highest in more than a year, at a time when most emerging market debt has rallied.
Meanwhile, Aberdeen Asset Management Israel fund manager Susan McDonald says she is underweight Israeli industrial companies, in part because of rising gas prices after Egypt in April terminated its agreement to supply gas to Israel.