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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 spikes as Strait of Hormuz disruption escalates US-Iran conflict. Oil prices surged the most in four years, with Brent jumping as much as 13% before settling about 6% higher near USD77/b, as traders reacted to the effective halt in tanker traffic through the Strait of Hormuz amid a rapidly escalating US-Israeli war with Iran. The vital chokepoint, which handles roughly a fifth of global oil flows, saw shipping largely pause as shipowners adopted a wait-and-see stance despite Iranian claims the waterway remains open. The conflict intensified after US and Israeli strikes across Iran and retaliatory attacks by Teheran on Israel and US-linked targets across the Gulf, marking a dangerous new phase for energy markets. While OPEC+ agreed to modest production increases, concerns persist that additional supply would be inaccessible if Hormuz remains disrupted. Oil could exceed USD100/b if flows are not restored quickly, underscoring the market’s vulnerability to prolonged geopolitical instability despite prior expectations of a global surplus.
Gold rises for a fourth day as Middle East war spurs safe-haven demand. Gold climbed for a fourth consecutive session, rising as much as 2.2% toward USD5,390/oz before trimming gains, as escalating conflict in the Middle East drove investors toward safe-haven assets. The surge came after the US and Israel struck Iran, killing its supreme leader, and Iran responded with a broader series of retaliatory missile attacks across the region, stoking market jitters. Gold’s rally this year, nearly 25% higher despite a sharp pullback from January’s record above USD5,595/oz, has been supported by geopolitical tensions, aggressive US foreign and trade policies, elevated central bank buying, and a broader investor shift away from sovereign bonds and currencies, helping gold post its longest monthly winning streak since 1973.
MIDDLE EAST - CREDIT TRADING
End of day comment – 27 February 2026. Relentless spread widening into month end. We were greeted early morning with the first trade being 5y Saudi CDS getting lifted at 81bp and that set the risk off tone for the rest of day. Soon after, the headline hit that the US advised non-emergency staff of the embassy in Israel to leave the country. That took macro risk markets another leg lower. Credit indices remain weak also on the back of private credit worries, so a bit a perfect storm in terms of news flow. Month end flows are remarkably balanced though so far. GCC names closed broadly 6/8bp wider, mostly on the rates move but, in some cases, also on slightly lower cash prices. On the new issue front new QIBKQD 31s was well received but with only a handful of trades around 100.15/100.20 from 100 reoffer. Same cannot be said for new ADGB 5/10y tranches which I have +6bp on both with little visibility and requests in the afternoon but trades around reoffer in cash price terms in the morning.
MIDDLE EAST - MACRO / MARKETS
Market repricing amid escalating US-Iran geopolitical tensions. Financial markets have reacted sharply to the escalating conflict involving the US, Israel, Iran, with a pronounced shift into risk-off positioning across asset classes. Oil prices surged significantly as traders priced in the potential for supply disruptions around the Strait of Hormuz, with Brent and WTI rising on fears that tanker traffic and crude exports could be interrupted lifting the broader energy complex. Equities, particularly major global and EM indexes have experienced downward pressure as investors reassess growth prospects amid heightened geopolitical risk and rising input costs. US stock futures and Asian shares opened lower, while safe-haven assets such as gold and US Treasuries strengthened. Overall, markets are balancing between the immediate inflationary impact of higher energy prices and the broader risk-off sentiment, with volatility remaining elevated until clearer signals merge on the trajectory of the conflict and its impact on physical energy flows.
S&P affirms Jordan at ‘BB-’ with stable outlook amid regional risks. S&P Global Ratings affirmed Jordan’s ‘BB-’ sovereign ratings with a stable outlook, citing the country’s economic resilience, rising international reserves, and continued donor support, despite heightened regional security risks and still-elevated public debt. Growth is forecast at around 3% in 2026, supported by tourism, stronger trade with Syria and Iraq, and ongoing structural reforms, while inflation remains contained. International reserves have reached record highs, boosted partly by higher gold valuations, and external financing continues to benefit from IMF, World Bank, and stronger US backing. However, fiscal and external vulnerabilities persist, with net general government debt projected to peak near 77% of GDP in 2026 before gradually declining, and current account deficits remaining sizeable. State-owned enterprise losses, high unemployment, and reliance on foreign aid continue to weigh on the credit profile, while the dinar’s peg to the US dollar supports stability but limits monetary flexibility. The stable outlook reflects a balance between reform progress and external buffers on one hand, and geopolitical risks and structural fiscal pressures on the other.
