DUBAI Gulf investors are far less nervous about the possibility of a U.S. or Israeli strike against Iran after the re-election of U.S. President Barack Obama, paving the way for further stock market gains in the world's top oil producing region.
A year ago, investors - already grappling with the Arab Spring unrest that toppled regimes in North Africa - viewed the threat of a strike on Iran's nuclear facilities and Tehran's possible retaliation against U.S. interests in the Gulf as the number one risk in the region.
Stock markets were in turmoil and oil prices climbed above $100 a barrel, hitting peaks near $127 last March.
Some Dubai residents even talked of stockpiling water and canned goods, while others discussed the best escape routes to Saudi Arabia.
"The risk from Iran is at a lower level now that Obama is in power for another term," said Haissam Arabi, chief executive and fund manager at Gulfmena Investments, during the Reuters Middle East Investment Summit.
Arabi said Obama's aim to renew efforts for a diplomatic resolution to Iran's suspected attempt to build a nuclear weapon ruled out the immediate threat of a strike.
Most Gulf stock markets, benefiting from inflows from Arab Spring countries, have rallied this year, piling on double-digit gains.
In Dubai, which has gained safe-haven status and which has also seen its battered property sector recover, the main stock index is up 18.2 percent in 2012 compared to a 17-percent decline last year. Abu Dhabi's index is up 10 percent while Saudi Arabia has gained 3.1 percent.
Rick Pudner, chief executive of Dubai's biggest bank Emirates NBD ENBD.DU said investors were used to dealing with upheaval, having witnessed two Gulf Wars and the Iran-Iraq war in the past 30 years.
"Obviously you're aware of it and you have to make some decisions accordingly but, generally speaking, the United Arab Emirates benefits from adversity in the region," he said.
Raza Agha, chief economist at VTB Capital, said when it comes to Iran-related risks: "I think there may be an element of markets getting used to the headlines, and perhaps hoping that that's all it will be - background noise."
Gulf Arab states, key U.S. allies who back Western sanctions against Tehran, are locked in a geopolitical struggle with Shi'ite Muslim power Iran, which sits just across the Gulf.
Sunni Gulf leaders fear Iran will exploit recent Shi'ite unrest in Bahrain and Saudi Arabia's Eastern Province to destabilize their rule.
Despite a year in which Tehran threatened to close the world's most important shipping line, the Strait of Hormuz, investors have largely taken the view that, given the fragile global economy, political leaders will be keen to avoid a flare-up in the world's biggest oil-producing region.
Concerns remain about the region, given the Syrian civil war. In October, Lebanon's intelligence chief was killed in a car bombing the country's opposition blamed on the Syrian government while, late last month, Jordan said it had foiled an al Qaeda plot to bomb its capital.
"I am more bearish on geopolitical risk than a year ago. It surprises me people are more confident as I think the neighborhood is more dicey," said a European banker at a Gulf-based lender, who declined to be named because of the sensitivity of the issue.
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(Additional reporting by David French, Mirna Sleiman, Nadia Saleem and Mala Pancholia; Editing by Louise Heavens)