S&P Global said that the ongoing fallout has rapidly escalated event risk in the Gulf region.
Investors who stocked up on Iraqi government bonds are turning tail after the Trump administration threatened sanctions amid the fallout from a US drone strike in Baghdad that killed top Iranian General Qassem Soleimani, reported Bloomberg.
Overseas investors betting on a reliable stream of oil revenue bought more than $3 billion of bonds sold by Iraq since 2006 when the country returned to international markets after being shut out for more than a decade.
US President Donald Trump has threatened Iraq with sanctions if it pushes American troops out of the nation in the wake of the strike without repaying the billions of dollars it cost to build military bases.
While support from oil exports should prevent Iraq’s debt from total collapse, investors are weighing the possibility of a political default. Choosing not to repay international investors could be a way to fight back against sanctions or at least take a stand.
S&P Global said that Iraq’s ‘B-‘ rating already incorporated a high degree of political risk and further escalation may destabilise the country’s security situation which was improving.
The rating agency stated that the ongoing fallout has rapidly escalated event risk in the Gulf region.