"Do you think it makes sense to hold a position in Gulf States equities? On the one hand, those countries are growing thanks to a booming oil price, mainly Saudi Arabia, UAE, Oman and Kuwait. Banks and building companies are showing strong performance and encouraging prospects. On the other hand turmoil in the area is growing too, and nobody can rule out that these circumstances can spread throughout the richer States with uncomfortable consequences. So the decision is not very easy, at least for me. I would appreciate your thoughts very much. Thank you. Very best to all of you."

Eoin Treacy's view Thank you for this topical question which is worth returning to following a tumultuous period in the Middle East which is arguably still having an affect on investor sentiment. Let's first recap.

Tunisia's popular revolt resulted in a change at the top but very little else. Egypt's government has been taken over by the military. There is a possibility that democracy will blossom in Egypt but it is far from a certainty. A precondition will be the formation of various political parties, a new constitution, a fair election and acceptance of the result by all those involved. This is a long list of preconditions and while we might hope for success, rationally time and more than a little luck will be required for institutional change to take hold. Saudi Arabia crushed internal dissent and massively increased social programs to discourage further protest. It successfully sent its army into Bahrain to quell the revolt there. Protests in Yemen and more recently Syria remain headline grabbers.

The Middle East has a massive young population that took to the streets in large numbers to protest food costs, high youth unemployment, low chances of social progression and the calcification of society with the same old leaders and no chance of change. China and India in particular also have large young populations but prospects for education, work and social mobility are more available because of institutional reform over the last decades than it has been in many Middle Eastern countries. At Fullermoney we have long held to the mantra that "Governance is Everything". Qatar and Abu Dhabi demonstrate that sound economic governance is not beyond the reach of the Middle East but significant change will be required to achieve it in other countries.

The bullish case for the Middle East is founded upon the potential productive capacity of its young people but is predicated on these young people finding work. The correlation of the region's stock markets to the oil prices have rarely been compelling because oil companies are state owned and wealth is concentrated in an oligarchy rather than redistributed.

The Turkish market has been publicized as the gateway to the Middle East and improving standards of fiscal governance have transformed stock market expectations over the last few years. The current pause is longer than any seen since 2008. We might rationalise the chart action as justified at least in part because of the Middle Eastern political upheaval. However, inflationary pressures are also mounting and will require a policy response probably sooner rather than later. The National 100 Index continues to hold above the psychological 60,000 level. A sustained move below it would break the medium-term progression of higher reaction lows and complete a top formation. This article might also be of interest.

The Saudi Arabian All Share Index bounced back emphatically from the March low to test the upper side of the 18-month range. However, a sustained move above 7000 will be required to indicate a return to medium-term demand dominance. The Saudi Banks Index has underperformed somewhat.

The Egyptian Index has stabilized after reopening but has yet to push back up into the overhead range and encountered at least short-term resistance near 550 last week. At a minimum it will need to sustain a rally above that level to begin to indicate demand is returning to medium-term dominance.

The Tunisian Index was one of the world's better performers prior to the recent social upheaval. It has since pulled back below the 200-day MA, which has turned downwards, and prices have paused above 4000 for the last few months. However, such has been the technical deterioration that a sustained rally above 4500 would be required to begin to suggest that demand is returning to dominance.

Qatar remains a regional leader as it continues to range mostly above 8000. It will need to hold above the early March low near 7500 if the medium-term uptrend it to remain relatively consistent.

Oman has found at least short-term support at the lower side of the 18-month range and a sustained move below 6000 would be required to check potential for an extension of the current bounce.

The UAE remains in a developing base formation with a mild upward bias. Bahrain, Jordan and Kuwait, remain in consistent medium-term downtrends.

In conclusion, investment opportunities will arise from the current turmoil. However, given the potential for additional social upheaval and the absence of compelling price action among related indices, I personally do not find the risk/reward profile of the region compelling at this point.

Israel is often overlooked in discussions of the Middle East but it is where sound governance, democracy and a strong entrepreneurial spirit are most evident. The Tel Aviv 100 Index retraced the entire bear market decline by early 2010 but has lost momentum over the last year. The Index is currently testing the lower side of the current range. A clear upward dynamic and/or sustained move above 1200 will be required to check scope for a further test of underlying trading. The Nasdaq Israel Index has been more consistent. It continues to hold above the psychological 300 level and the 200-day MA. A sustained move below the former would be required to question the consistency of medium-term move.