Citigroup says Middle East deals can withstand contained war

Dubai: The rising conflict between Israel and Hamas will likely have a limited impact on deal activity in the Middle East if it doesn’t escalate into a wider war, according to Citigroup’s regional head of investment banking.

“So far, it’s a very muted impact,” Miguel Azevedo, the Wall Street firm’s chairman of emerging markets EMEA investment banking, said in an interview with Bloomberg Television on Friday. “If it stays contained we don’t really believe there will be much of an impact.”

“Sentiment is a bit more nervous, but there are a lot of reasons to be nervous and volatile in the market these days,” he said, pointing to the worsening sentiment after US inflation data bolstered bets on rate hikes.

The IPO scene in the region is “resilient,” Azevedo said, adding that next year’s pipeline is “very solid.”

An unprecedented incursion into Israel by Hamas militants on Saturday and retaliatory airstrikes have cast a shadow over the region’s boom in deals, which had been a bright spot in an otherwise difficult environment for dealmakers.

Despite the resurging conflict, the region’s initial public offerings have fared well this week. Saudi wealth fund-backed oil driller ADES Holding Co. jumped 34 per cent after its Riyadh debut and Oman’s OQ Gas Networks SAOG’s $749 million IPO drew more than $10 billion after pricing at the top of the range.

Still, concerns that the conflict could become broader are taking a toll on market sentiment. Saudi Arabia’s benchmark Tadawul All Share Index erased all yearly gains on Thursday as the war compounded risks in a market that’s already buffeted by monetary and geopolitical headwinds.

On Thursday, economist Nouriel Roubini said markets are discounting the risk of a major war where Iran and Lebanon get involved, which would result in the disruption of oil supplies from the Gulf and a huge economic impact.