Mr Markets tells it best
European governments might be able to maintain neutrality on the Qatari crisis with a straight face, but their bankers’ hearts, and hands, are already not so clean. And since Mr Market interprets political developments best in the twenty-first century, it provides the clearest direction of the latest Middle East crisis. It turns out that European, led by British, banks have stopped buying and selling the Qatari Riyal, putting downward pressure on the currency. That would be awkward on any given day, but the Riyal’s case is different, because just like other GCC currencies it is pegged to the US dollar at 3.65.
Early last week, though, it traded as high as 3.7884, throwing the country’s reserve, deficit and debt paradigm into a tailspin. But then it got worse, and banks stopped accepting trades. This, of course, comes on top of the downgrade by rating agencies to ‘negative watch’ till the storm blows over, at least. Judging by events so far, Doha is in no mood to fold. If anything, the Saudi-UAE stranglehold has driven Qatar even closer to Iran and Turkey. With neither side willing to blink, and Qatar’s economy straining, the stakes are only rising.