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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
OPEC+ pauses early-2026 output hikes as oil extends rally. Oil prices climbed for a fourth consecutive session after OPEC+ announced it would pause production increases during the first quarter of 2026, following a modest 137,000b/d hike in December. Brent rose above USD65/b and WTI neared USD61/b, marking their longest rally since September. The move reflects growing caution amid a potential global glut that has weighed on prices rover the past three months, despite tighter US sanctions on Russian producers. The alliance still has about 1.2 million b/d to restore from earlier cuts, though many members have struggled to meet output targets due to capacity constraints and previous overproduction offsets. Traders are also watching for physical supply disruptions following a Ukraine drone attack that hit Russia’s Tuapse oil terminal, while geopolitical tensions involving Nigeria added uncertainty. Overall OPEC+’s decision underscores its efforts to balance market stability with revenue needs after months of volatility.
China’s VAT change pressures Gold demand as prices hover near USD4,000. Gold steadied around USD4,000/oz after an early drop today, as traders assessed the impact of China’s decision to end a long-standing tax rebate for some retailers, a move likely to dampen demand in one of the world’s largest gold markets. China announced that retailers can no longer fully offset valued-added tax (VAT) on gold purchased from the Shanghai Gold and Futures Exchange unless the metal is sold as an investment product. The change triggered a selloff in Chinese jewellery stocks and raised concerns over consumer demand following a record-setting rally in October fuelled by retail buying. Despite the recent pullback, gold remains up more than 50% YTD, underpinned by ongoing central bank purchases and safe-haven demand.
MIDDLE EAST - CREDIT TRADING
End of day comment – 31 October 2025. A quieter than usual month end. Flows picked up in the afternoon but remained well lower than a usual month end. Sellers outstripped buyers by a small margin mainly on ETF outflows. Though with the UST weakness post London close spreads again closed a couple of bp tighter on average. However prices are starting to adjust lower as the market starts to push back against ever tighter spreads. In sovgn bonds that was seen in QATAR today where we had some cash price weakness in long end bonds, 50s closing -0.625pt/+1bp. 35s also were active closing -0.25pt/+1bp. On the higher beta side OMAN saw supply in the belly, 31s closing -0.25pt/+3bp. But on the other hand the long end remained very well bid with 47s leading the way closing +0.375/-5bp. Quasis saw more selling as well, mainly in the 5y area. Fins and corps remained on the quieter side. In primary markets SIB announced plans to issue a 5y sukuk and given spreads and yield levels we should see more opportunistic new issue announcements. Overall low vol and low volumes remain highly corelated. The market is pushing back against quasi sovgn bonds with yields approaching 4% in the shorter end, but is still happy to absorb any bond in the longer end with yields above 5.25%. Hence higher beta credits outperformed today
MIDDLE EAST - MACRO / MARKETS
S&P affirms Qatar’s rating on strong fiscal buffers and LNG expansion outlook. S&P reaffirmed Qatar’s sovereign credit rating at ‘AA’ with a stable outlook, citing its strong fiscal buffers, vast LNG reserves, and significant external assets managed though the Qatar Investment Authority (QIA). The agency highlighted that Qatar’s economy remains resilient despite regional geopolitical risks, supported by liquid assets estimated at 170% of GDP. Growth will be driven by the North Field Expansion project, which will raise LNG capacity from 77 to 126 million tons annually by 2027, lifting real GDP by about 5% per year and boosting fiscal surpluses to around 6% of GDP by 2028 Debt is expected to fall from 46% of GDP in 2025 to near 30% by 2028, while the currency account surplus should average 15% of GDP. S&P noted the ongoing diversification under the National Development Strategy and prudent macroeconomic management will continue to anchor Qatar’s credit stability despite ongoing regional and external risks.
Turkey’s trade deficit widens amid import growth. Turkey’s trade deficit rose to USD6.9bn in September 2025, widening from USD5.2 bn a year earlier, driven largely by a rebound in imports. Cumulative data for January-July 2025 showed the trade gap expanding 12.2% y/y to USD55.9bn, underscoring continued external imbalances despite government efforts to moderate domestic demand. Exports remained steady but failed to offset stronger import growth, particularly in energy and intermediate goods. The persistent deficit highlights the structural challenge of Turkey’s dependence on imported inputs and energy, weighing on its external position and pressuring the lira. Going forward, narrowing the trade gap will depend on sustained export diversification, stronger energy efficiency, and stable global demand.
