Abu Dhabi – The heightened conflict between Israel and Iran will dominate headlines, but likely have limited impact on issuers of Sukuks (Islamic bonds) in the Gulf Cooperation Council (GCC) countries.

Notes Faisal Ali, Senior Portfolio Manager at Azimut: ‘We do not foresee a near-term resolution of the conflict. Nevertheless, the key actors - including the US and Chinese governments - have indicated that they do not want a full scale inter-state war.’

In fact, the GCC economies have maintained a good momentum in sectors such as tourism, trade and foreign investment. The region accounts for almost one third of the world’s oil supply and straddles major trade routes.

‘Looking forward, an increase in hostilities that has an impact on trade or tourism will likely be offset by the effect on GCC economies of higher oil prices’, says Ali.

‘GCC economies have built up sizeable fiscal and external buffers and are in a strong position to support domestic demand should the conflict expand in unanticipated ways.’

‘Further, GCC banks are well capitalised and have ample liquidity to support Sukuk issuers in the unlikely event of the closure of global financial markets to regional borrowers’.

Azimut is currently taking a defensive approach to GCC assets at a time that geopolitical events may result in higher risk premia and volatility.

However, as Ali observes, the company ‘plans to buy Sukuks and add to risk in portfolios if those securities fall sharply in price. In that outcome, we would see the fundamental strength of the GCC economies as providing a major opportunity.’

Meanwhile, Azimut has recently been honoured in the Bonds, Loans & Sukuk Middle East AWARDS 2024. Azimut won awards in two categories - Best Global Sukuk Fund Strategy (3 Years) and Best MENA Equity Fund Strategy (3 Years).

To read Azimut’s report on this opportunity click here

About Azimut Group

Azimut is an independent, global group in the asset management space, serving institutional, private, and corporate clients, with presence in DIFC and ADGM. A public company listed on the Milan Stock Exchange (AZM.IM), Azimut is a leader in Italy and active in 18 countries around the world, managing approximately US$100 billion in AUM. Azimut group currently has more than 1,400 employees, of which 200+ are investment professionals. Since 2010, Azimut has grown internationally, expanding to key markets including the Middle East, China, Latin America, and the US. Through the expansion, Azimut has broadened its asset class offering, and today boasts unique products such as one of the world’s largest global sukuk fund, a private markets GP staking fund, ESG-compliant public and private markets funds, and more.

For more information, visit www.azimut-group.com

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