Dubai: Another month, another tanker attack in the vicinity of Arabian Gulf. But that isn’t denting investors’ enthusiasm for the region’s dollar debt.

The prospect of interest-rate cuts by the Federal Reserve is outweighing an escalation of tensions in the region after Iran seized a British oil tanker in the Strait of Hormuz last week. Expectations of further easing by the European Central Bank have also widened a sea of negative-yielding bonds, adding to the appeal of securities in the Gulf Cooperation Council, a six-nation bloc spread along the shore of the Arabian Gulf across from Iran.

GCC bonds have returned 1.2 per cent this month, outpacing the 0.5 per cent gain in emerging-market dollar debt, according to Bloomberg Barclays indexes. Reflecting the hunger for yield, securities sold by Oman and Bahrain, which have the weakest finances in the region, have led the region’s gains.

“I don’t think the spread moves reflect elevated geopolitical noise, whose frequency has certainty increased, as investors do not expect any direct military engagement,” said Angad Rajpal, the head of fixed income at Emirates NBD Asset Management in Dubai. “More pervasive central-bank easing has underpinned strong returns in emerging-market and regional debt this year.”

While any miscalculation by Iran or its Western antagonists could lead to a wider armed conflict in the Middle East, Washington and Tehran have both insisted they don’t want a war and the UK defence minister said he wanted to de-escalate the situation. Crude oil has declined almost 5 per cent this month.

“The tame reaction is also reflected in Brent crude price, which has struggled to move higher on these headlines,” Rajpal said.

The region’s debt inclusion in JPMorgan Chase & Co.’s emerging-market indexes also means there’s consistent demand for securities from the region, which boasts an average credit rating of A+.