Geopolitical tensions in the Middle East are on the brink of boiling over after Israel’s assassinations of high-ranking Hezbollah and Hamas officials this week. It remains to be seen what the response from either group, or Iran, may be. But were the conflict to escalate, the economic spillovers would be most severe in Lebanon, with Jordan and Egypt indirectly affected. The good news for the latter two is that IMF deals should contain balance of payments strains. Indeed, Egypt unlocked the latest tranche of its deal this week. Finally, the flash Saudi Q2 GDP data pointed to a strong outturn from the non-oil sector. But with the budget deficit widening, the government’s support for the economy is likely to be put to the test.
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