How did the armed conflict with Iran affect the country risks of Israel and the Emirates?

One of the key indicators of a country's investment attractiveness is the country risk premium (CRP). It is typically calculated based on the yield spread between sovereign bonds traded on international financial markets and long-term U.S. Treasury securities. Since 2004, we have been monitoring the dynamics of country risk on a monthly basis. For four dozen of the most investment-attractive countries, the results of these calculations are published in our analysis of investment attractiveness and country risk. 

Sharp negative changes in the political and economic environment, such as military conflicts, can significantly influence country risk levels. For example, the war in Ukraine led to a sharp increase in the country risk of Russia, Ukraine, and Belarus by several tens of percent, as demonstrated in a recent academic study on the financial impact of the war in Ukraine. But how did the outbreak of a new armed conflict in the Middle East in early 2026 affect country risk?

To answer this question, we conducted a series of daily observations of market quotations for sovereign bonds issued by Israel (maturing in May 2060) and the United Arab Emirates (maturing in October 2061). These bonds are actively traded and widely quoted across major international financial markets.

Data on the dynamics of country risk for Israel and the UAE from 27 February to 13 March 2026 are presented in the charts below.

 

The charts reveal synchronous fluctuations, with nearly simultaneous increases reaching peak values.

However, overall changes in the country risk levels of Israel and the UAE appear to be relatively minor. At present, investors do not seem to interpret the current political and economic developments as significantly affecting long-term expectations.

Both Israel and the UAE therefore continue to demonstrate low country risk levels, indicating a relatively small probability that an investment asset will lose value—either partially or completely—as a result of macroeconomic, financial, or socio-political factors inherent to the country, independent of the specific investment project.