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Middle East Daily
SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T: +44(4)387 5031
E: soojin.kim@ae.mufg.jp
MUFG Bank, Ltd. and MUFG Securities plc
A member of MUFG, a global financial group
Middle East Daily
COMMODITIES / ENERGY
Oil retreats as geopolitical risk premium fades. Oil prices fell sharply after posting their strongest monthly gain since 2022, as geopolitical risk premiums eased following comments from President Trump indicating renewed talks with Iran. Brent slipped toward USD67/b after rising 16% in January, while WTI held above USD63/b, with Trump playing down threats of regional conflict and expressing optimism about a potential deal. The pullback comes after weeks of gains driven by fears of supply disruptions in the Middle East, which had briefly overshadowed concerns about a looming global surplus. Adding to the bearish tone, OPEC+ confirmed plans to keep production steady in March, while broader market sentiment was weighed down by a sharp correction in precious metals, reinforcing a shift away from risk-driven momentum trades.
Precious metals slide after overheated rally unwinds. Gold and silver retreated sharply after an overheated, record-breaking rally reversed abruptly, with gold suffering its steepest drop in more than a decade and silver swinging violently in volatile trading. The selloff was triggered by news that President Trump plans to nominate Kevin Warsh as Fed chair, lifting the dollar and undermining bests on prolonged currency weakness that had fuelled the surge in precious metals. The correction was exacerbated by stretched positioning, extreme volatility, and heavy options-related buying that had mechanically amplified gains. While strong retails demand in China and dip-buying interest may help stabilise prices, the break in the one-way rally has dented sentiment and could ease speculative pressure and supply tightness, particularly in silver, in the near term.
MIDDLE EAST - CREDIT TRADING
End of day comment – 30 January 2026. We've had our first bout of "weakness" for 2026. We use the quotes this isn't what weak markets trade like, but this weakness is just relative that what the market has been doing since the week before Thanksgiving. Month end machinations went through today without much fanfare, and to be honest they were pretty low volume with respect to the previous few month ends (Dec excepted). Jan 2026 issuance was more than 17% higher than the next biggest USD EM issuance month of the past 10 years and we navigated it with aplomb. EM HY and EMBIG spreads are 3bps off 15 year tights and EM IG 4 bps are off 20 year tights. We have hinted at this before but this builds a kind of virtuous feedback loop where by spreads are so skinny that any kind of retracement is met with enthusiastic buying because this may be our only chance to get bonds cheap. So each widening is smaller and smaller because we all remember last time when we waited for 10bps wider and didn't get anything so we buy at 7bps wider next time, and then 5 bps the time after that. While this cannot keep up forever, it usually takes an exogenous shock to break that cycle. FWIW we don't think that shock is going to be military action against Iran or their response to it. We've already micro-dosed that.
MIDDLE EAST - MACRO / MARKETS
Moody’s revises Israel outlook to stable as geopolitical risks ease. Moody’s Rating has revised Israel’s sovereign outlook from negative to stable while affirming its Baa1 ratings, reflecting a material easing in geopolitical risks and the economy’s resilience following two years of conflicts. The change follows the end of the military confrontation with Iran in mid-2025 and fragile ceasefires with Hamas and Hezbollah, which have reduced the likelihood of a further significant deterioration in Israel’s credit profile, even as he security environment debt to stabilise around 68% of GDP over the medium term, well above pre-October 2023 expectations, but sees fiscal risks as balanced by Israel’s strong market access, deep investor base, and ability to fund deficits at manageable costs. The agency highlighted the economy a capacity to withstand shocks, underpinned by continued investment tin the technology sector and a projected rebound in growth to about 5% in 2026. While geopolitical tensions, fiscal consolidation challenges ahead of upcoming elections, and elevated social risks remain key constraints, Moody’s believe improved risk dynamics and economic strength now support a stable outlook at the Baa1 level.
UAE consolidates sovereign assets under new centralised structure. The UAE is restructuring its sovereign asset management framework by integrating the USD263bn wealth fund ADQ into L’imad Holding Co. creating a consolidated investment platform that could oversee assets worth about USD500bn. The new structure places L’imad under the direct supervision of Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, and clarifies the allocation of economic portfolio within Abu Dhabi’s ruling family, following a period in which ADQ was chaired alongside leadership of the Abu Dhabi Investment Authority. The move streamlines oversight of major state assets as Abu Dhabi manages nearly USD2 trillion in capital through its investment entities.
