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Historic political shake-up of area encouraging investors

Ceasefire expected to take pressure off Israel's financial resources

Major funds increasing positions in Egypt

Expects resolution of Lebanon's crisis increasing its bonds

(Recasts heading, includes emergency Arab summit in paragraph 8)

By Marc Jones and Steven Scheer

LONDON/JERUSALEM, Feb 9 (Reuters) - A historic shake-up of the Middle East is beginning to draw global financiers, warming to the potential customers of relative peace and financial healing after so much chaos.

President Donald Trump's proposal that the U.S. take control of Gaza might have tossed a curveball into the mix, but the fragile ceasefire in the Israel-Hamas war, Bashar al-Assad's ouster from Syria, a weakened Iran and a new government in Lebanon have actually fed hopes of a reset.

Egypt, the region's most populated country and an essential mediator in the recent peace talks, has just handled its first dollar debt sale in 4 years. Not too long ago it was dealing with financial disaster.

Investors have actually begun buying up Israel's bonds again, and those of Lebanon, wagering that Beirut can lastly start repairing its intertwined political, financial and financial crises.

"The last few months have really much reshaped the area and set in play a very various dynamic in a best-case circumstance," Charlie Robertson, a veteran emerging market expert at FIM Partners, wiki.snooze-hotelsoftware.de said.

The concern is whether Trump's plan for Gaza irritates stress again, he added.

Trump's call to "clear out" Gaza and produce a "Riviera of the Middle East" in the enclave was met international condemnation.

Reacting to the outcry, Egypt said on Sunday it would host an emergency situation Arab top on February 27 to discuss what it explained as "severe" advancements for Palestinians.

Credit ranking firm S&P Global has actually signified it will remove Israel's downgrade caution if the ceasefire lasts. It acknowledges the complexities, however it is a welcome possibility as Israel readies its very first significant financial obligation sale since the truce was signed.

(UN)PREDICTABILITY

Michael Fertik, a U.S. endeavor capitalist and CEO of expert system company Modelcode.ai, said the easing of stress had contributed to his decision to open an Israeli subsidiary.

He is excited to work with experienced local software application developers, but geopolitics have been a factor too.

"With Trump in the White House, no one questions the United States has Israel ´ s back in a battle," he said, explaining how it provided predictability even if the war re-ignites.

Having mainly remained away when Israel ramped up spending on the war, bond investors are likewise starting to come back, main bank data programs.

Economy Minister Nir Barkat informed Reuters in an interview last month that he will be looking for a more generous spending plan focusing on "strong financial growth."

The snag for stock investors however, is that Israel was among the finest carrying out markets in the world in the 18 months after the October 7, 2023 attacks. Since the ceasefire - which has actually corresponded with a sizable U.S. tech selloff - it has actually remained in retreat.

"During 2024, I think we learned that the market is not really afraid of the war however rather the internal political dispute and stress," said Sabina Levy, head of research at Leader Capital Markets in Tel Aviv.

And if the ceasefire buckles? "It is affordable to assume an unfavorable response."

Some investors have currently reacted terribly to Trump's surprise Gaza relocation.

Yerlan Syzdykov, head of emerging markets at Europe's biggest possession manager Amundi, said his company had actually purchased up Egypt's bonds after the ceasefire deal, but Trump's plan - which anticipates Cairo and Jordan accepting 2 million Palestinian refugees - has changed that.

Both countries have baulked at Trump's idea but the threat is, Syzdykov explained, that the U.S. president uses Egypt's dependence on bilateral and IMF support to try to strong arm the nation provided its current brush with a full-blown economic crisis.

Reducing the attacks by Yemen's Houthi fighters on ships in the Red Sea also remains important. The nation lost $7 billion - more than 60% - of its Suez Canal profits last year as shippers diverted around Africa rather than danger ambush.

"Markets are unlikely to like the idea of Egypt losing such (bilateral and multilateral) support, and we are taking a more careful stance to see how these settlements will unfold," Syzdykov said.

REBUILD AND RESTRUCTURE

Others anticipate the rebuilding of bombed homes and facilities in Syria and elsewhere to be an opportunity for Turkey's heavyweight building and construction companies.

Trump's Middle East envoy, Steve Witkoff, has said it might take 10 to 15 years to rebuild Gaza. The World Bank, meanwhile, puts Lebanon's damage at $8.5 billion, approximately 35% of its GDP.

Beirut's default-stricken bonds more than doubled in price when it ended up being clear in September that Hezbollah's grip in Lebanon was being compromised and have continued to rise on hopes the country's crisis is resolved.

Lebanon's brand-new President Michel Aoun's very first state check out will be to Saudi Arabia, a nation seen as a potential key advocate, and one that most likely sees this as a chance to further get rid of Lebanon from Iran's sphere of impact.

Bondholders say there have actually been preliminary contacts with the brand-new authorities too.

"Lebanon could be a big story in 2025 if we make progress towards a financial obligation restructuring," Magda Branet, head of emerging markets repaired earnings at AXA Investment Managers, said.

"It is not going to be simple" though she added, provided the country's track record, the $45 billion of financial obligation that requires reworking and that Lebanese savers could see some of their money taken by the government as part of the strategy.

(Reporting by Marc Jones and Steve Scheer; Editing by Sharon Singleton and William Mallard)

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