seibutsujournal

Historic political shake-up of region motivating financiers

Ceasefire expected to take pressure off Israel's finances

Major funds increasing positions in Egypt

Expects resolution of Lebanon's crisis increasing its bonds

(Recasts headline, includes emergency situation Arab summit in paragraph 8)

By Marc Jones and Steven Scheer

LONDON/JERUSALEM, Feb 9 (Reuters) - A historic shake-up of the Middle East is starting to draw global investors, warming to the prospects of relative peace and financial recovery after so much turmoil.

President Donald Trump's proposition that the U.S. take control of Gaza might have tossed a curveball into the mix, but the vulnerable ceasefire in the Israel-Hamas war, Bashar al-Assad's ouster from Syria, a weakened Iran and a brand-new government in Lebanon have actually fed hopes of a reset.

Egypt, the area's most populated country and a crucial mediator in the recent peace talks, hb9lc.org has simply managed its very first dollar financial obligation sale in 4 years. Not too long ago it was facing financial disaster.

Investors have begun purchasing up Israel's bonds again, and those of Lebanon, betting that Beirut can finally start repairing its intertwined political, financial and monetary crises.

"The last couple of months have quite reshaped the area and embeded in play an extremely various dynamic in a best-case circumstance," Charlie Robertson, a veteran emerging market expert at FIM Partners, setiathome.berkeley.edu said.

The question is whether Trump's plan for Gaza irritates tensions again, he included.

Trump's call to "clear out" Gaza and create a "Riviera of the Middle East" in the enclave was fulfilled with global condemnation.

Reacting to the uproar, Egypt said on Sunday it would host an emergency Arab summit on February 27 to discuss what it explained as "severe" advancements for Palestinians.

Credit score company S&P Global has signified it will eliminate Israel's downgrade warning if the ceasefire lasts. It acknowledges the complexities, but it is a welcome possibility as its first major debt sale given that the truce was signed.

(UN)PREDICTABILITY

Michael Fertik, a U.S. investor and CEO of artificial intelligence firm Modelcode.ai, said the easing of tensions had actually contributed to his decision to open an Israeli subsidiary.

He is excited to work with skilled local software application developers, but geopolitics have been an aspect too.

"With Trump in the White House, no one questions the United States has Israel ´ s back in a fight," he said, explaining how it supplied predictability even if the war re-ignites.

Having mainly remained away when Israel increase costs on the war, bond financiers are also starting to come back, main bank data shows.

Economy Minister Nir Barkat told Reuters in an interview last month that he will be seeking a more generous spending package concentrating on "bold financial development."

The snag for stock financiers though, is that Israel was one of the best performing markets in the world in the 18 months after the October 7, 2023 attacks. Since the ceasefire - which has actually accompanied a large U.S. tech selloff - it has actually remained in retreat.

"During 2024, I think we found out that the market is not truly afraid of the war however rather the internal political dispute and stress," said Sabina Levy, head of research study at Leader Capital Markets in Tel Aviv.

And if the ceasefire buckles? "It is reasonable to presume a negative reaction."

Some investors have currently responded severely to Trump's surprise Gaza relocation.

Yerlan Syzdykov, head of emerging markets at Europe's most significant asset manager Amundi, said his company had purchased up Egypt's bonds after the ceasefire deal, but Trump's plan - which anticipates Cairo and Jordan accepting 2 million Palestinian refugees - has changed that.

Both countries have baulked at Trump's concept but the danger is, Syzdykov explained, that the U.S. president utilizes Egypt's dependence on bilateral and IMF support to attempt to strong arm the country provided its current brush with a full-blown recession.

Reducing the attacks by Yemen's Houthi fighters on ships in the Red Sea likewise remains crucial. The country lost $7 billion - more than 60% - of its Suez Canal incomes in 2015 as shippers diverted around Africa rather than risk ambush.

"Markets are unlikely to like the concept of Egypt losing such (bilateral and multilateral) support, and we are taking a more cautious position to see how these settlements will unfold," Syzdykov said.

REBUILD AND RESTRUCTURE

Others anticipate the rebuilding of bombed homes and facilities in Syria and in other places to be a chance for Turkey's heavyweight building and construction firms.

Trump's Middle East envoy, Steve Witkoff, has said it could take 10 to 15 years to reconstruct Gaza. The World Bank, meanwhile, puts Lebanon's damage at $8.5 billion, approximately 35% of its GDP.

Beirut's default-stricken bonds more than doubled in rate when it ended up being clear in September that Hezbollah's grip in Lebanon was being damaged and have continued to increase on hopes the country's crisis is addressed.

Lebanon's brand-new President Michel Aoun's very first state visit will be to Saudi Arabia, a nation viewed as a potential key advocate, and one that most likely sees this as a chance to further get rid of Lebanon from Iran's sphere of impact.

Bondholders state there have been initial contacts with the new authorities too.

"Lebanon could be a huge story in 2025 if we make progress towards a financial obligation restructuring," Magda Branet, head of emerging markets repaired earnings at AXA Investment Managers, said.

"It is not going to be easy" though she added, offered the country's track record, the $45 billion of debt that requires reworking which Lebanese savers might see some of their cash taken by the government as part of the strategy.

(Reporting by Marc Jones and Steve Scheer