The imposition this week by the EU of an oil embargo on Iran as well as financial sanctions on Iran's central bank is likely to keep geopolitical tensions elevated in the GCC, especially as Arab unrest aftershocks linger on. This is being increasingly priced into regional fixed income markets, with 5-year CDS in Saudi Arabia moving above its Arab unrest peak of 2011. That being said: “We see limited direct impact on the GCC from Iran international sanctions, except in the unlikely event of tail risks materializing, and thus reiterate our overweight recommendation on high-quality Abu Dhabi and Qatar sovereigns,” Bank of America Merrill Lynch (BofA Merrill Lynch) said in its report.
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