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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 holds steady ahead of expected OPEC+ output hike. Oil prices held steady on 4 July, with Brent hovering near USD69/b and WTI trading above USD67/b, as markets awaited the outcome of this weekend’s OPEC+ meeting. The group is expected to approve another sizeable supply increase of 411,000b/d for August, marking a consecutive monthly hike aimed at regaining market share. While geopolitical tensions in the Middle East have eased, broader concerns about weakening global demand and uncertainty around trade negotiations continue to weigh on sentiment. On the supply side, upcoming nuclear talks with Iran and newly announced sanctions on entities involved in oil trade are adding complexity. Meanwhile, a wildfire near major oil producing area in Canada raised fresh concerns about seasonal disruptions. Despite recent volatility, the broader outlook remains clouded by mixed signals on both the demand and supply fronts.
Gold on track for weekly gains despite rate headwinds and trade uncertainty. Gold held near USD3,330/oz on 4 July, poised for a weekly gain of around 1.7% despite slipping on 3 July after strong US labour data lowered the odds of near-term Fed rate cuts. The dollar and Treasury yields rose following the upside payroll surprise and a drop in unemployment, pressuring gold which offers no yield. While rate cut bets faded, gold remained supported by haven demand amid geopolitical and trade uncertainties, including looming unilateral tariffs from the US ahead of the 9 July deadline. Central bank buying and concerns over the inflationary impact of Trump’s multitrillion-dollar fiscal package also underpinned sentiment, with bullion still up more than 25% YTD.
MIDDLE EAST - CREDIT TRADING
End of day comment – 03 July 2025. Another day of substantial spread tightening. That is not only due to UST weakness and higher yields, cash prices are higher as well in many cases. All said, it was a quieter day flow-wise and sellers actually outnumbered buyers a touch. But the street bid remains very firm and absorbs seemingly every flow and yield back up. Duration bonds remain best bid although UST flattener tightened short end spreads as well. QATAR 50 closing +0.125pt/-5bp, ADGB +0.25pt/-6bp. The Qatar curve was very active today with trades in almost every bond whereas ADGB had a quiet day. Higher beta credit also on the quieter side. MOROC found clearing levels in the belly, 32s and 33s were active closing unch/-5bp. OMAN was very quiet, the bid seem to shift into quasi sovereign where ENEDEV 33s closed at new highs/tights around 103.50 (+0.375pt/-10bp). Other quasis, QPETRO was active on the back of the activity in the QATAR curve, the best bid remains in 41s closing +0.50pt/-10bp. In corps DPWDU continued its squeeze higher but eventually found some profit takers in the afternoon, 35s closing +0.125pt/-6bp. The strength of the last 3 trading sessions has taken us broadly back to YTD tights. NFP induced rates volume didn't caused cash bids to move. Tomorrow will be quiet on MENA Friday and July 4th, the focus will start to shift to next week’s trade deadline.
MIDDLE EAST - MACRO / MARKETS
GCC PMI signals strong non-oil sector growth in June. PMI readings across the GCC showed broad resilience in June, with Saudi Arabia, Qatar, and the UAE maintaining expansion in their non-oil sectors. In Saudi Arabia, the PMI rose to 57.2 in June from 55.8 in May, supported by a surge in new orders, robust output, and the fastest pace of job creation in 14 years. Qatar’s PMI climbed to 52.0 from 50.8, reflecting strong wage growth, solid hiring, and rising backlogs despite a slight decline in new business. In the UAE, the headline PMI rose modestly to 53.5 from 53.3, although new orders grew at the slowest pace since September 2021 amid regional tensions. Dubai’s PMI, however, slipped to 51.0 in June from 53.2 in May, the lowest in nearly four years, as competitive pressures and softer tourism weighted on new business. Overall, the data highlights continued expansion in the region’s non-oil private sectors, albeit with some signs of pressure in demand.
IMF review delay threatens Egypt’s next USD1.2bn disbursement. IMF may merge the fifth and sixth reviews of Egypt’s USD8bn support program, delaying a USD1.2bn disbursement by at least six months due to slow progress on structural reforms. These reforms include greater state asset divestment, a more flexible exchange rate, and improved governance. The IMF completed the fourth review in March, unlocking USD1.2bn, and also approved USD1.3bn under the Resilience and Sustainability Facility (RSF). A May IMF visit began the fifth review, but no staff report has been released yet. Meanwhile, Egypt’s Tax Authority approved limited VAT reform, including applying the standard VAT rate to construction and raising taxes on tobacco and alcohol. However, more substantial steps may be needed to secure future IMF funding.
