Middle East Developments – Impact on Post-Trade and Capital Markets

Thomas Murray’s Risk Committee (RC) met today to assess the rapidly evolving geopolitical situation in the Middle East and its potential implications for post-trade markets, financial market infrastructures (FMIs), sub-custodian banks, and global custodians operating in the region.

Over the weekend, a significant military escalation followed coordinated U.S. and Israeli airstrikes targeting Iranian leadership and military infrastructure. The reported death of Iran’s Supreme Leader represents a major inflection point in regional tensions and has triggered retaliatory missile and drone strikes across Israel and several Gulf states. The situation remains fluid, with continued military activity, heightened security alerts, and broader geopolitical uncertainty.

Market impact

The immediate market impact has included temporary closures in the United Arab Emirates and Kuwait (which has now reopened), widespread airspace restrictions across parts of the Gulf, and elevated oil price volatility driven by concerns over regional stability and shipping routes near the Strait of Hormuz. While most regional capital markets remain operational, they are functioning under heightened alert conditions and increased supervisory oversight.

Risk outlook

Following its review, the Thomas Murray RC has decided to place the Overall Risk Outlook and the Operational Risk Outlook “On Watch” for all monitored entities located in the Middle East, including central securities depositories, sub-custodian banks, and other capital market infrastructures. In the UAE, where markets remain closed on 3 March, the Liquidity Risk Outlook has also been placed On Watch to reflect potential funding pressures and settlement delays arising from the suspension of trading activity.

Across the wider region, markets in Kuwait, Oman, Bahrain, Saudi Arabia, Qatar, Egypt, Israel, and Jordan continue to operate as normal at the time of writing, although under enhanced monitoring. Turkey, while not directly affected by military action, has introduced precautionary market-stabilisation measures, including the temporary suspension of short selling, and adjustments to central bank liquidity operations, aimed at containing volatility and supporting financial stability.

A summary of the actions taken to date can be found below:

All monitored entities have activated their business continuity and operational resilience frameworks. At this stage, no systemic settlement failures or prolonged infrastructure outages have been reported, and custody, clearing, and payment systems remain operational where markets are open. Nevertheless, indirect disruption risks remain. Global custodians may experience operational impact where local markets close, where sub-custodian banks suspend activity, or where liquidity conditions tighten and foreign exchange availability becomes constrained. Thomas Murray is therefore closely monitoring settlement cycles, payment flows, funding conditions, and regulatory responses across affected jurisdictions.

In parallel with the kinetic escalation, the cyber threat environment has intensified materially. The conflict is unfolding within a hybrid warfare context in which cyber operations form a central component of state and non-state activity. Recent monitoring indicates a sharp increase in cyber targeting across the Gulf states and Israel, with financial services, government institutions, media organisations, and critical infrastructure sectors facing elevated risk. Iran maintains a sophisticated and operationally active cyber capability, with a history of destructive malware deployment, financial sector targeting, and supply chain intrusion. The precedent of regional banking disruptions in 2025 underscores the potential for retaliatory or symbolic cyber operations against financial institutions during periods of heightened geopolitical tension.

While there is currently no evidence of widespread cyber disruption to capital market infrastructures, clients should assume an elevated threat posture. Strengthening perimeter security, validating patch management and remote access controls, ensuring immutable offline backups, and reviewing third-party dependencies remain prudent risk-mitigation steps under current conditions.

Thomas Murray continues to monitor developments closely and will convene ad hoc Risk Committee meetings as required. We are assessing potential impacts on market infrastructure resilience, liquidity dynamics, operational continuity, and regulatory intervention measures on an ongoing basis. Clients will be informed promptly of any material changes to risk outlooks or operational status across the region as further information becomes available.