International bonds issued by Gulf governments weakened on Thursday after two tankers were hit in suspected attacks in the Gulf of Oman, a month after a similar incident in which four tankers in the region were struck. Saudi Arabia’s bonds due in 2049 were down over 0.6 cents in early trade while $3 billion in bonds issued by state oil giant Saudi Aramco, also due in 2049, were down by roughly 1 cent on the dollar, according to Eikon Refinitiv data.

The price drop, however, started to ease later in the day and regional credit default swaps — which indicate the cost of insuring against a default — were fairly stable, with only Saudi Arabia up by one point early in the morning, according to IHS Markit.

“This looks like a knee-jerk reaction,” said a Gulf analyst, who asked not to be named. “The market is very sensitive to geopolitical developments.”

Regional stock markets were also in the red, with a missile strike by Yemen’s Houthi rebels on a civilian airport in southern Saudi Arabia on Wednesday also weighing on risk sentiment.

Details of the tanker incident were not immediately clear, but oil prices surged 4 per cent, as the suspected attacks came amid tensions between Iran and the US over Tehran’s nuclear programme that were heightened last month by attacks on Gulf oil assets.

S&P Global Ratings said in a research note this week that if diplomatic and military tensions escalate to the point of threatening a blockage of the Strait, this could lead to an increase in Gulf sovereigns’ funding costs, and to a disruption in foreign direct investment. But the agency said it had not changed any of its ratings or its outlooks for Gulf governments.