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US, Israel, and Iran agreed in principle to a two-week conditional ceasefire, sparking de-escalation hopes, though immediate reciprocal attacks and disagreements over Lebanon’s exclusion from the ceasefire deal suggest the truce remains fragile.

Iran has agreed to reopen the critical Strait of Hormuz (SoH) under its watchful eyes, with its approval and upto 15 ships a day, but credit markets are still likely to retain a geopolitical risk premium amid uncertainty over ceasefire enforcement, negotiation talks failure and re-escalation risks.

Our sister company BMI’s baseline expectation is for a preliminary framework deal to be reached possibly with some deadline extensions, that covers the fundamental issues of disagreements between the parties by April.

Safe reopening of the Strait of Hormuz would help ease risks to energy supply, trade flows, inflation, and business activity across the GCC and South & Southeast Asia, though normalization is likely to be gradual and the looming threat of a reclosure of the Strait at the slightest misstep will remain an overhang.

Saudi Arabia appears relatively better positioned than regional peers, while oil and gas prices, shipping insurance costs, and possible transit charges are likely to remain above pre-conflict levels.

Primary issuance from the Middle East and S&SEA could gradually resume, especially sukuk, or banks and state-linked deals, although near-term volatility is likely to persist and deter issuance.