Civil strife and terrorism in Yemen could pose a greater threat to the Gulf countries of the Middle East than tumbling oil prices, a major bank said on Tuesday.

"We can't help but think that the turmoil in Yemen is the emerging and underappreciated risk for investors in GCC (Gulf Cooperation Council) stocks," said Citi analysts Josh Levin and Rahul Bajaj in a research note distributed from London on Tuesday.



Houthi rebels take security measures with tanks around the parliament in Sanaa, Yemen, in February 2015. Mohammed Hamoud | Anadolu Agency | Getty Images

Despite worries about Islamic insurgency and destabilization in the Middle East and North Africa, investors in the oil-exporting GCC countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) have focused on the potential hit from the slump in energy prices, with crude oil down around 50 percent since a peak in June 2014.

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However, Levin and Bajaj said that increasing strife in Yemen—which borders Saudi Arabia to the south and Oman to the west— could be an "underappreciated risk" to the GCC. "One of the key takeaways from our GCC trip in early February came from an executive in Qatar who observed that while most people are focused on the price of oil, the recent instability in Yemen posed a greater and underappreciated risk to the GCC. Recent events appear to bear out this executive's observation," they said on Tuesday.