By Marc Jones

LONDON (Reuters) – Hopes of a ceasefire deal to end the war in Gaza lifted the region’s government bond markets and the Israeli shekel on Tuesday as investors felt relief after 15 months of conflict.

Negotiators were meeting in Qatar hoping to finalize a ceasefire and hostage release deal after US President Joe Biden signaled it was within reach.

More than six hours after the talks began, there was still no word on an outcome, but ties between Israel and those of Lebanon, Egypt and Jordan were increasing as optimism grew.

The Israeli shekel and the Egyptian pound were also much higher in foreign exchange markets.

Achieving a cease-fire agreement would close a historic few months in the Middle East.

It has included Israel’s assassination of Hamas leader Yahya Sinwar, Iran-backed Hezbollah being weakened enough to allow Lebanon to elect a new president, and perhaps most surprising of all, the Syria’s veteran leader Bashar Al-Assad has been overthrown.

Marten Bressel, portfolio manager and fee trader at FIM partners, said the combination of events was helping to boost sentiment towards the region after a difficult couple of years.

“The ceasefire agreement is a part of that and hopes are quite high at the moment that the new Syrian government will open the country more to the West,” he said.

However, Lebanon has been the most important trade for investors.

Its bonds have nearly tripled in recent months amid hopes that it can begin to address its dire financial problems now that nearly two years of near-complete political paralysis appear to have passed.

Israel’s markets bear the scars of the past 15 months of conflict in Gaza. The high cost of the fighting has seen the country’s sovereign credit rating downgraded several times, although it had never been cut before last year.

(Reporting by Marc Jones; Editing by Gareth Jones)