Investors have become markedly more confident about Iraq in the past few weeks on growing evidence of some political stability and improving public finances after $7bn of its debt was written off by the United Arab Emirates.

Credit derivatives prices, which are the best gauge of risk in the debt markets and act as a kind of insurance against bonds defaulting, have fallen by more than 75 basis points since May 23. This has reduced the cost to insure Iraqi debt against default by €75,000 ($118,000) annually for €10m of debt over five years.