Hopes of a ceasefire deal to bring an end to the ongoing Gaza conflict fueled optimism in the region’s financial markets on January 14, as investors anticipated relief following 15 months of intense fighting.
Negotiators gathered in Qatar, working to finalize an agreement on a ceasefire and the release of hostages, after U.S. President Joe Biden suggested that a deal was within reach.
Despite over six hours of talks without a definitive outcome, Israel’s government bonds and those of neighboring countries, including Lebanon, Egypt, and Jordan, showed signs of recovery. This positive sentiment was reflected in modest gains in Israel’s shekel and Egypt’s pound in the currency markets.
The potential for a ceasefire deal marks a pivotal moment in what has already been a historic series of events in the Middle East. This period saw the death of Hamas leader Yahya Sinwar at the hands of Israel, significant weakening of Iran-backed Hezbollah, the election of a new president in Lebanon, and the unexpected fall of Syria’s long-time president Bashar al-Assad.
Marten Bressel, a portfolio manager and rates trader at FIM Partners, noted that these developments have contributed to growing optimism about the region’s future after years of uncertainty. “The ceasefire deal is one part of that, and hopes are high that Syria’s new government may open up more to the West,” Bressel commented.
Among the most significant gains was seen in Lebanon, where government bonds have nearly tripled in value over recent months. This surge is driven by expectations that Lebanon may be able to address its deep financial crisis following the end of a prolonged period of political paralysis.
Israel’s financial markets, however, have borne the heavy toll of the past 15 months of conflict. The war has had a lasting impact on the country’s sovereign credit rating, which has been downgraded multiple times since last year—marking a stark contrast to its previously stable ratings.
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