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Historic political shake-up of region motivating financiers

Ceasefire anticipated to take pressure off Israel's finances

Major funds increasing positions in Egypt

Expects resolution of Lebanon's crisis increasing its bonds

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

By Marc Jones and wiki.myamens.com Steven Scheer

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

President Donald Trump's proposition that the U.S. take over Gaza may have thrown a curveball into the mix, but the vulnerable ceasefire in the Israel-Hamas war, Bashar al-Assad's ouster from Syria, a weakened Iran and a new federal government in Lebanon have actually fed hopes of a reset.

Egypt, the region's most populous country and a key negotiator in the recent peace talks, has just managed its first dollar financial obligation sale in four years. Not too long ago it was facing financial crisis.

Investors have started purchasing up Israel's bonds again, and those of Lebanon, betting that Beirut can lastly start repairing its linked political, economic and monetary crises.

"The last few months have quite reshaped the region and embeded in play an extremely different dynamic in a best-case situation," Charlie Robertson, a veteran emerging market expert at FIM Partners, said.

The question is whether Trump's plan for Gaza inflames stress again, he added.

Trump's call to "clean out" Gaza and create a "Riviera of the Middle East" in the enclave was consulted with worldwide condemnation.

Responding to the outcry, Egypt said on Sunday it would host an emergency Arab summit on February 27 to discuss what it explained as "severe" developments for Palestinians.

Credit score firm S&P Global has signified it will get rid of Israel's downgrade warning if the ceasefire lasts. It acknowledges the complexities, but it is a welcome possibility as Israel prepares its first major financial obligation sale since the truce was signed.

(UN)PREDICTABILITY

Michael Fertik, a U.S. endeavor capitalist and CEO of synthetic intelligence firm Modelcode.ai, said the easing of stress had actually added to his choice to open an Israeli subsidiary.

He is excited to work with proficient local software developers, however geopolitics have been an aspect too.

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

Having mainly remained away when Israel increase costs on the war, bond financiers are likewise beginning to come back, main bank data programs.

Economy Minister Nir Barkat told Reuters in an interview last month that he will be seeking a more generous spending package focusing on "strong economic development."

The snag for stock investors though, is that Israel was one of the best carrying out markets worldwide in the 18 months after the October 7, 2023 attacks. Since the ceasefire - which has accompanied a sizable U.S. tech selloff - it has remained in retreat.

"During 2024, I believe we learned that the marketplace is not truly afraid of the war but rather the internal political dispute and tensions," said Sabina Levy, head of research study at Leader Capital Markets in Tel Aviv.

And if the ceasefire buckles? "It is sensible to presume a negative response."

Some investors have currently reacted severely to Trump's surprise Gaza move.

Yerlan Syzdykov, head of emerging markets at Europe's greatest property supervisor Amundi, said his company had bought up Egypt's bonds after the ceasefire deal, however Trump's plan - which predicts Cairo and Jordan 2 million Palestinian refugees - has altered that.

Both countries have baulked at Trump's concept but the danger is, Syzdykov explained, that the U.S. president uses Egypt's dependence on bilateral and IMF support to attempt to strong arm the country provided its current brush with a full-blown recession.

Reducing the attacks by Yemen's Houthi fighters on ships in the Red Sea likewise remains crucial. The country lost $7 billion - more than 60% - of its Suez Canal revenues last year as carriers diverted around Africa rather than threat ambush.

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

REBUILD AND RESTRUCTURE

Others expect the restoring of bombed homes and facilities in Syria and somewhere else to be a chance for Turkey's heavyweight building firms.

Trump's Middle East envoy, Steve Witkoff, has said it could take 10 to 15 years to reconstruct Gaza. The World Bank, on the other hand, puts Lebanon's damage at $8.5 billion, roughly 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 weakened and have actually continued to rise on hopes the nation's crisis is addressed.

Lebanon's new President Michel Aoun's first state see will be to Saudi Arabia, a nation seen as a possible key supporter, and one that likely sees this as a chance to more get rid of Lebanon from Iran's sphere of impact.

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

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

"It is not going to be simple" though she included, given 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 federal government as part of the plan.

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