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In this note, we survey how Middle Eastern markets fared in the recent turmoil in global financial markets triggered by the response to the bankruptcy of Lehman Brothers, the demise of the other independent broker dealers and the U.S. bailout of AIG and of the broader financial system. The events of last week, illustrate clearly that the Middle East is not, if it ever was, immune from global trends. However, it is the real economy linkages and various home grown liquidity vulnerabilities that provide the most pause going forward. However, this isn’t a time to be drastic, with oil still over $100 a barrel, there are a lot of oil revenues going to the GCC and the broader region but the Middle East may be as prone to capital misallocation as anywhere.
