Bahrain pulls $30 million from Pakistan bonds as Gulf war weighs on foreign investment

Bahrain withdrew $30 million from Pakistan’s domestic bonds during the first 10 days of FY2026-27 as the Gulf conflict weakened foreign investment flows into the country, State Bank of Pakistan data showed.

The withdrawals comprised $21 million from treasury bills and $9 million from Pakistan Investment Bonds. No investment was recorded from Gulf countries during the period.

Luxembourg accounted for the only reported inflow, investing $4 million in treasury bills, which offer returns of up to 11.5%.

Overall, domestic government securities recorded a net foreign outflow of $30 million during the first 10 days of the fiscal year. The market had already posted a net outflow of more than $500 million in FY2025-26.

The renewed US-Israeli conflict with Iran has pushed up oil prices and increased uncertainty across the region, weakening Pakistan’s prospects for attracting investment from Gulf countries and creating additional risks for exports.

The conflict also prompted the United Arab Emirates to withdraw $3.5 billion placed with the State Bank of Pakistan. Saudi Arabia replaced the amount to help Islamabad avoid pressure on its current account.

Remittance inflows from Gulf countries have so far remained unaffected, but market participants warned that a prolonged conflict could eventually disrupt these flows, which remain a major source of foreign exchange for Pakistan.

They said rising regional uncertainty, domestic security concerns and stagnant exports could further weaken investor confidence, keep economic growth below 4% and limit the creation of new jobs.