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Iran’s overnight strikes on US bases in Jordan and Bahrain — the al-Azraq airbase and the Fifth Fleet headquarters in Manama — mark the first time since the April ceasefire that direct state-on-state fire has reached two GCC-aligned sovereigns whose entire investment proposition rests on insulation from regional war.
The Islamic Revolutionary Guard Corps said it launched drone attacks on the US Fifth Fleet in Bahrain and the Ali Al Salem airbase in Kuwait, as well as a long-range missile strike on an airbase in Azraq, Jordan, in retaliation for US strikes on Iranian ports and islands in the Strait of Hormuz.
Jordan’s military said it shot down five missiles from Iran, with no casualties or material damage, while Bahrain said it intercepted and destroyed “a number of Iranian aerial attacks”.
The US action that preceded it was framed as proportional. CENTCOM said on X that it had struck Iranian air defence, ground control stations, and surveillance radar sites near the Strait of Hormuz with precision munitions from US Air Force and Navy fighter jets.
The trigger was kinetic, not political. Al Jazeera’s Alan Fisher, reporting from Washington, DC, said the US military believes the helicopter was brought down by an Iranian Shahed drone – a one-way attack drone – just off the coast of Oman.
The escalation matters for credit because the geography matters. Jordan and Bahrain are not Iraq or Syria — they are IMF programme countries, dollar-pegged, and structurally dependent on Western capital.
Bahrain’s vulnerability is the sharpest. Fitch Ratings on February 23, 2026 cut Bahrain’s sovereign credit rating to ‘B’ from ‘B+’, and changed the outlook from ‘negative’ to ‘stable,’ citing concerns over rising debt. The agency expects Bahrain’s very high government debt-to-GDP ratio to continue increasing, despite the implementation of a fiscal consolidation package.
The IMF’s January 2026 read was already stark. The fiscal position continued to deteriorate in 2024, with the overall fiscal deficit to GDP rising to 11 percent and gross government debt to GDP increasing to 134 percent, above the 2020 recession peak.
Onto that fiscal stack sits a financial hub whose entire raison d’être is being the safe processing node of the Gulf. The size of the assets of the banking sector in Bahrain was USD 252.3 billion as of June 2025 (3.6% YoY increase). Growth in Retail and Wholesale Banking continued in 2025 with YoY growth of 5.7% and 1.8% respectively.
Bahrain’s position as a regional financial center is essential to the development of its economy where the financial sector plays a significant role in economic activity and employment creation. The financial sector is the largest non-oil contributor to GDP representing 17.0% of real GDP in Q2 2025.
That hub now sits under an Iranian targeting cone. The Atlantic Council’s MENA desk had already flagged the asymmetry before this week’s strikes: Kuwait and Qatar have the lowest CDS levels, reflecting their strong financial conditions. The UAE has the next best credit, according to the markets, while Saudi Arabia and Oman trail behind. Only Bahrain has elevated CDS costs, a function of its large debt burden.
Jordan is structurally different but politically more exposed. Jordan’s four-year EFF arrangement, with access amounting to SDR 926.37 million (about US$1.3 billion, equivalent to 270 percent of Jordan’s quota in the IMF), was approved by the IMF Executive Board on January 10, 2024. This decision allows for an immediate purchase of an amount equivalent to SDR 97.784 million (about US$130 million), taken at the fourth review on 12 December 2025.
The IMF’s own December 2025 staff report was explicit about the tail: public debt is assessed to be sustainable. While risks remain, including from future shocks such as an intensification of regional conflicts or changes in U.S. financial support, and with sizable gross financing needs.
Both named risks fired this week.
Jordan’s debt stock is the binding constraint. On the recent increase in public debt, which reached JD 35.8 billion, or 93 per cent of GDP, during the first four months of 2025, Shibli said that the rise is temporary.
The mechanism for sovereign risk transmission is the dinar peg and the gross financing need. Jordan must roll Eurobonds and access concessional Western lending; Bahrain must continue to attract GCC and Western deposits and refinance an exceptionally heavy maturity wall.
A missile that lands in Manama harbour or Azraq governorate — even an intercepted one — re-prices both.
Oil markets have not yet aligned with the geopolitical pricing. Brent swung around $91 a barrel on Wednesday, after falling about 3% in the previous session and reversing earlier gains seen during Asian trading, as traders assess escalating tensions in the Middle East. Iran launched attacks on several Gulf nations, including Bahrain, Jordan, and Kuwait, following US “self-defence strikes” in response to the downing of an American helicopter. Traffic through the Strait of Hormuz remains significantly disrupted, with Iran blocking most shipping through the key waterway, while the US has imposed its own restrictions on Iranian ports.
That Brent is trading roughly flat with Hormuz partially closed and four US-aligned states under fire reflects positioning fatigue, not benign fundamentals.
The Gulf’s defensive posture has begun to fragment. There has also been increasing engagement between Tehran and Abu Dhabi, Doha and Riyadh, which may explain the limited attacks to specific Gulf states. There may be “some contacts going on between Emiratis and Iranians that made Iran not target the UAE this time,” Azizi said.
Read inversely: Bahrain and Jordan, lacking the bilateral channel that Abu Dhabi, Doha and Riyadh have built, sit in the residual category of targetable US-aligned sovereigns. That is the new political-risk taxonomy.
The Iranian doctrine on display is itself a structural shift. Trita Parsi, executive vice president of the Quincy Institute for Responsible Statecraft in the US, said Iran’s swift response to Washington’s attacks signalled a new doctrine. “They believe they have to respond proportionately, but very harshly and swiftly, against any American attack. Because otherwise, a new normal is established, one in which the United States can strike at Iran with more or less impunity,” he said.
For LPs holding GCC exposure, the proportionality logic cuts both ways: each US action now mechanically generates an Iranian response inside a host-state’s sovereign territory, regardless of that host-state’s preferences.
The second-order risk most readers will miss is capital recycling. Gulf sovereign wealth funds, managing $5.7 trillion in aggregate assets, maintained their investment pace despite ongoing conflict with Iran. Most Gulf state funds continued directing capital into developed market assets, with US companies and funds remaining a primary destination. Saudi Arabia’s Public Investment Fund deployed $6.1 billion in emerging markets post-war, more than double its $2.43 billion in developed market investments. Abu Dhabi’s Mubadala invested over $5.6 billion in developed markets since the war began.
If Iranian strikes shift from intercepted symbolism to actual base damage — the IRGC’s F-35 hangar claim remains unverified by CENTCOM — Gulf SWF reallocation toward domestic stabilisation could begin to bite US private credit and AI infrastructure financing.
The house view: the discount on Bahraini and Jordanian dollar paper relative to GCC peers would probably widen by 30–60bp over the coming month if the missile cadence continues, with Bahrain CDS the most exposed leg. Long Qatar/Kuwait versus short Bahrain at the sovereign level captures the new targeting taxonomy at low carry cost.
Jordanian Eurobond spreads are the secondary trade: the IMF programme is the floor, but a second strike on al-Azraq — particularly one with confirmed damage — would likely test that floor before the Article IV process can re-anchor it. Hedging Jordanian exposure via five-year CDS, rather than reducing cash positions, remains the cleaner expression for funds with mandate constraints on EM frontier sovereigns.
Sources
1. The New Arab / AFP — “After US strikes, Iran hits US bases in Jordan, Bahrain, Kuwait”, 10 June 2026 — https://www.newarab.com/news/after-us-strikes-iran-hits-bases-jordan-bahrain-kuwait
2. Al Jazeera — “Iran attacks Bahrain, Kuwait, Jordan in retaliation for US strikes”, 10 June 2026 — https://www.aljazeera.com/news/2026/6/10/iran-strikes-bahrain-and-jordan-in-retaliation-for-us-attacks-in-hormuz
3. Al Jazeera — “US attacks Iran after Apache helicopter downed in Strait of Hormuz”, 9 June 2026 — https://www.aljazeera.com/news/2026/6/9/trump-says-iran-shot-down-us-helicopters-over-hormuz-vows-to-respond
4. CNN — “Live updates: Iran launches retaliatory strikes on US targets in the Middle East”, 10 June 2026 — https://edition.cnn.com/2026/06/09/world/live-news/iran-war-trump-israel
5. TradingView / TradingEconomics — “Fitch Downgrades Bahrain Credit Rating to ‘B'”, 23 February 2026 — https://www.tradingview.com/news/te_news:527794:0-fitch-downgrades-bahrain-credit-rating-to-b/
6. Al Arabiya — “Fitch downgrades Bahrain to ‘B’ on rising debt, wider deficits”, 23 February 2026 — https://english.alarabiya.net/business/economy/2026/02/23/fitch-downgrades-bahrain-to-b-on-rising-debt-wider-deficits
7. IMF — “IMF Executive Board Concludes 2025 Article IV Consultation with The Kingdom of Bahrain”, 27 January 2026 — https://www.imf.org/en/news/articles/2026/01/27/pr-26023-the-kingdom-of-bahrain-imf-executive-board-concludes-2025-article-iv-consultation
8. Central Bank of Bahrain — Financial Stability Report No. 39, September 2025 — https://www.cbb.gov.bh/wp-content/uploads/2025/11/FSR-39-SEP-2025.pdf
9. IMF — “IMF Executive Board Completes the Fourth Review under the EFF and First Review under the RSF Arrangements for Jordan”, 12 December 2025 — https://www.imf.org/en/news/articles/2025/12/12/pr-25423-jordan-imf-completes-the-4th-rev-under-eff-and-1st-rev-under-rsf-arrang
10. IMF — Jordan Country Report 25/155 (Fourth EFF Review staff report), December 2025 — https://www.imf.org/-/media/files/publications/cr/2025/english/1jorea2025001-print-pdf.pdf
11. Zawya / Jordan Times — “Jordan’s Finance minister: IMF-supported reform programme to boost stability, cut debt, ease pressure on citizens”, July 2025 — https://www.zawya.com/en/economy/levant/jordans-finance-minister-imf-supported-reform-programme-to-boost-stability-cut-debt-ease-pressure-on-citizens-lx2yqs8j
12. TradingEconomics — Brent crude oil daily commentary, 10 June 2026 — https://tradingeconomics.com/commodity/brent-crude-oil
13. Atlantic Council MENASource — “After the Iran war, the Gulf’s next economic phase awaits”, May 2026 — https://www.atlanticcouncil.org/blogs/menasource/after-the-iran-war-the-gulfs-next-economic-phase-awaits/
14. The National — “No slowdown in Gulf sovereign investments amid Iran war”, 1 June 2026 — https://www.thenationalnews.com/business/economy/2026/06/01/no-slowdown-in-gulf-sovereign-investments-amid-iran-war/
15. NBC News — “U.S. launches new attacks on Iran in response to downing of helicopter, CENTCOM says”, 9–10 June 2026 — https://www.nbcnews.com/news/us-news/pilots-fine-us-military-helicopter-goes-down-strait-hormuz-rcna349137