Assad’s fall triggers rally in Lebanon’s dollar bonds on hopes of stability

(Originally posted on : Invezz )

Lebanon’s dollar-denominated bonds rallied over 1% on Monday following the dramatic fall of Syrian President Bashar al-Assad, as rebels seized Damascus in a lightning offensive.

Investors expect Assad’s exit, and its implications for Iran’s regional influence, to weaken Hezbollah and pave the way for economic and political stability in Lebanon.

The country’s 2029 bond saw the largest gain, rising 1.05 cents to 11.78 cents on the dollar—its highest level since December 2022, according to Tradeweb data reported by Reuters.

Despite this surge, Lebanese bonds remain distressed, a reflection of ongoing challenges in the country’s financial and political systems.

Assad’s collapse weakens Iran’s influence, undermines Hezbollah

The collapse of Assad’s government marks a significant setback for Iran, which loses a crucial ally in its regional “arc of influence” and a key supply route to Hezbollah in Lebanon.

Analysts suggest this could reduce security risks for Israel and potentially lead to a more market-friendly government in Lebanon.

“This undermines Hezbollah further, which could mean lower security risks for Israel and an environment conducive to reform in Lebanon,” Hasnain Malik of Tellimer Research told Reuters.

Hezbollah, a significant player in Lebanon’s protracted political deadlock, may be forced to adopt a more constructive stance.

The country has been without a head of state or fully empowered cabinet since October 2022, amid one of the worst economic crises globally.

Global reactions to Syria’s regime change

Syria’s regime change has energized markets across the region.

Oil prices surged, with Brent crude gaining 1.3% to trade at $72 per barrel, and West Texas Intermediate rising 1.5% to $68.18.

Gold and other commodities, including stocks in companies like Antofagasta and Rio Tinto, also saw gains as markets responded to the geopolitical shift.

Turkish construction-related stocks, particularly cement and steelmakers also soared as investors anticipated their involvement in Syria’s post-conflict rebuilding.

Oyak Cimento, owned by Turkey’s Army Pension Fund, surged 9.9% in Istanbul trading, closing at 20.92 liras, Cimsa, a prominent cement manufacturer under Sabanci Holding, rose as much as 10%.

Isdemir, a major steel producer, and Limak Dogu Anadolu Cimento, a cement maker, each jumped 10%.

The surge in Turkish construction stocks reflects investor expectations that Turkish firms will play a pivotal role in rebuilding infrastructure and housing in Syria, leveraging geographical proximity and industrial expertise.

Expert take

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, tempered optimism by noting,

The fall of Syria’s president Bashar al-Assad has been warmly received by many, at least outside Russia and Iran, but a key lesson from the other Arab Spring countries is that hopes for a shift towards a liberal, Western-style democracy are likely to be dashed.

“The implications for the global economy and energy markets from events in Syria are likely to be limited, although these potentially represent another major shift in the geopolitical sands in the region,” he added.

With renewed focus on reconstructing the Levant, including potential political reform in Syria, Lebanon stands to benefit—provided stability follows.

Investors and analysts alike will closely watch how these developments impact the region’s fragile balance in the coming weeks.

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