At a recent investor conference in Los Angeles, the man who oversees Egypt's stock markets was touting his country's battle to tame inflation and boost foreign investment when he was interrupted by a call on his cell phone.

It was his assistant in Cairo reporting a bombing on the Sinai Peninsula, the second in two weeks.

Hani Sarie-Eldin didn't miss a beat. "The markets barely moved," he said, returning to an interview. "Doesn't that prove my point?"

That incident highlighted a problem facing Middle East officials: how to attract investors to a region plagued by violence and economic volatility. A wave of selling that has hit several of the region's hottest stock markets — Saudi Arabia's market has fallen 38 percent since February — has led some to question whether the Middle East is a safe place to invest.

But Middle Eastern experts say the market volatility and violence had overshadowed some significant changes under way in the regional economy. They say leaders are starting to get serious about reform, still unnerved by the 1999 Asian financial crisis and worried about recent tensions with the United States.

Egypt, Jordan and Morocco have privatized lucrative state-owned firms and strengthened their financial markets. Governments in Dubai, Oman and Bahrain are negotiating trade deals, tightening bank regulations and investing in ports, highways and telecommunications systems.

Last year, Saudi Arabia joined the World Trade Organization after agreeing to further open up its economy to foreigners.

In addition to petrodollars, the money flowing into the region includes a growing amount of overseas funds and repatriated Middle Eastern wealth pulled out of the U.S. and Europe after the 9/11 attacks.

Though still minuscule by Asian standards, foreign investment into the region is expected to total $24.5 billion this year, nearly six times as large as the 2000 amount, according to the Milken Institute.

Previous oil spikes have primarily benefited the region's rulers and a handful of wealthy families. Governments have been slow to open up their markets to trade and investment. Stagnant growth and high inflation have slowed the regional economy, creating unemployment rates that are double the global average.

Some of the largest economies — Israel, Iran and Libya — have been hobbled by political boycotts or sanctions.

But to Sarie-Eldin, chairman of Egypt's Capital Market Authority, the glass looks half full.

"The real challenge is to make this growth sustainable," he said, pointing out that his government must double foreign investment every year to create enough jobs for its booming population. Last year, foreigners invested $3.9 billion in Egypt, up from $300 million in 2003.

Some investors apparently shared Sarie-Eldin's enthusiasm. At the Milken Institute's ninth annual Global Conference, which attracted 2,500 people, the sessions on investing in the Middle East were standing-room only.

David Butter, a Middle East editor for the Economist Intelligence Unit, a London-based research organization, said political risks remain high, given instability in Iraq, rising Islamic fundamentalism in Egypt and the nuclear showdown in Iran. He said regulation of the financial markets in the Persian Gulf is patchy, leaving them vulnerable to speculation and price spikes.

But Glenn Yago, Milken's director of capital markets, said many governments in the Middle East had concluded that economic reform, however painful, is the most effective way to "insulate their economies against terrorism."

Terrorism exacts a cost, according to a new study by the Milken Institute. It shows that countries suffering terrorist attacks, particularly those aimed at private property, experience a "negative and significant impact on economic growth" because of such things as lost tourism revenue and forgone investment.

Middle East business leaders attending the Milken conference said they welcomed more investment and trade with the United States but worried that politics would halt the flow of American dollars. In the meantime, they said other countries were stepping into the void.

The European Union is forging trade agreements with the Middle East, making it easier for its energy firms and high-tech companies to set up bases in the region. The rise of China and India has given countries in the Middle East an alternative source of capital and markets. After last week's U.S. visit, Chinese President Hu Jintao stopped in Saudi Arabia, Morocco and Nigeria, where his country has forged major deals on energy and trade.