Experience would tell you that, in the current dispute between Qatar and its neighbours, cooler heads on both sides would prevail soon enough, and the situation in the region revert to normal. However, reviewing the list of demands made overnight by Saudi Arabia and its allies of Qatar provides good reason to think again.

In short, the list of demands is steep, and so it is hard to imagine Qatar engaging in the necessary set of climb-downs that acquiescence would entail. Among the demands is found: Qatar shutting down Al-Jazeera; ending military co-operation with Turkey; paying repatriations; and, best of all, facing ten years of annual compliance monitoring!

Qatar is supposed to agree to all of this within ten days. As one set of mostly very wealthy nations faces off against another, very wealthy, nation, what seems more likely is a medium- or even long-term stalemate. This, both sides can probably manage: certainly, nobody in Qatar is going to go hungry as a result of any current blockade.

The implications are probably more troubling for EM investors’ sense of the region. GCC (Gulf Cooperation Council) assets have historically anchored many an EM portfolio: these are wealthy, stable, well-run economies, after all.

Perhaps not. With a millennial Crown Prince in charge in Saudi Arabia; with oil threatening to break out of its 1Y range to the downside; and, above all, with a far from steady hand on the tiller in the White House, it is not clear if the GCC should, any longer, be taken as the hallmark of stability it once was.

As I said above, we shouldn’t be surprised if a face-saving way out of the current impasse is found, and the GCC thus reverts to type. But at first glance, this morning’s rather surprising list of demands suggests that this time could be different. Investors should prepare accordingly.

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