To read the full report, please download the PDF above.
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 as US-Iran talks temper geopolitical risk. Oil prices steadied ahead of planned talks between Iran and the US, easing immediate fears of military conflict and supply disruptions after a recent selloff. Brent hovered near USD68/b and WTI traded below USD64/b, with prices stabilising after US President Trump said negotiations were under way and Saudi Arabia cut Asian prices by less than expected, signalling confidence in demand. Despite the reprieve, oil is on track for its first weekly loss since mid-December as some Middle East risk premium unwinds, though uncertainty over the scope and outcome of US-Iran negotiations continues to overhang the market amid signs of global oversupply. Elsewhere, tentative progress in Ukraine-related talks added to the calmer geopolitical backdrop, while BP Plc said it is seeking a partner to expand production at Iraq’s Kirkuk field, highlighting ongoing efforts to bring relatively low-cost Middle Eastern supply to market.
Silver whipsaws on thin liquidity as post-rally volatility intensifies. Silver swung sharply between losses and gains as thin liquidity and fading speculative demand triggered extreme volatility, underscoring the metal’s struggle to find a price floor after last month’s surge unravelled. Spot silver plunged nearly 10% toward USD64/oz before rebounding to post gains of up to 3.5%, following a 20% drop in the prior session that erased all January’s gains, while gold also reversed earlier losses. Silver has now fallen about 40% from its record, with recent moves among the most violent since 1980, amplified by speculative positioning, leveraged products, and thinner over-the-counter trading. While gold’s deeper liquidity has helped it weather the turbulence better, the episodes has raised broader questions about precious metals’ role as reliable hedges, even as some large asset managers maintain constructive long-term views on gold.
MIDDLE EAST - CREDIT TRADING
End of day comment – 05 February 2026. We think this may be the slowest, most orderly trading day where stocks are down 1.5% and rates are whipping around in EM Credit that I can remember. WE are tempted to reference the "This is fine" meme with the dog sitting amongst the fire, but this isn't weakness yet! For the most part cash prices are up slightly in IG and unchanged in HY names which is allowing for a nice little widening on spreads. Aside from a street led run to hit HY benchmarks earlier in the day, flows have been utterly quiet. No fast money looking to trim, no real money retreating to benchmarks, no street cleaning up the footprints of that happening away from us. ETF basis doesn't suggest any rush to hedge books. We know this won't keep up but the lack of volatility in EM Credit is remarkable. (Core credit looks equally unphased with over only +3bps and CDX HY +5bps).
MIDDLE EAST - MACRO / MARKETS
IMF sees resilient Israel economy but flags fiscal and structural challenges. The IMF’s 2026 Article IV mission finds that Israel’s economy has shown resilience following the Gaza ceasefire, with growth projected to rise form 2.9% in 2025 to 4.8% in 2026, supported by a rebound in private consumption and investment, while inflation is expected to ease to below 2% by mid-2026. However, the conflict has left a lasting imprint, including elevated defence spending, higher risk premium, and labour supply constraints from prolonged military mobilisation and reduced non-Israeli workers, which are expected to lower medium-term growth to around 3.5%. Public finances have deteriorated sharply, with the fiscal deficit widening and public debt rising to nearly 69% of GDP by end-2025, prompting the IMF to call for additional fiscal consolidation beyond the 2026 budget to put debt on a firm downward path while protecting civilian spending. The IMF also stresses the urgency of structural reforms to raise labour participation and productivity, particularly among Haredi men and Israeli-Arab women, alongside measures to strengthen the business environment and high-tech competitiveness. Monetary policy is assessed as appropriately tight, with scope to gradually ease toward neutral if inflation continues to moderate, while the financial system remains stable but requires close supervision due to banks’ significant exposure to real estate and ongoing geopolitical risk.
KSA and Kuwait deepen energy cooperation with major energy agreements. Saudi Arabia and Kuwait have signed a set of agreements to strengthen bilateral energy cooperation, covering power generation and upstream oil operations. The deals, signed in the presence of Saudi Energy Minister Prince Abdulaziz bin Salman, include an agreement between an ACWA Power-led consortium and Kuwait’s Ministry of Electricity, Water and Power Project, a USD4.1bn development that will deliver around 2,700MW of electricity and up to 120 million imperial gallons of desalinated water per day. In parallel, Saudi Aramco’s Gulf Operations and the Kuwait Gulf Oil Company signed an agreement related to joint operation at Khafji, reinforcing cooperation in shared oil assets and underscoring the two countries’ efforts to deepen integration across the energy value chain.
