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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 rises as OPEC+ opts for modest output hike amid surplus fears. Oil prices rose after OPEC+ agreed to increase output by 137,000bp/d in October, a smaller step than in recent months, reflecting the group’s cautious approach as it unwinds earlier supply cuts amid fears of a looming surplus. Brent climbed above USD66/b and WTI neared USD63/b , rebounding from last week’s sharp losses on speculation of an imminent hike. While the modest increase helped stabilise prices, concerns persist that record surpluses predicted by the IEA next year could drive Brent into the low USD50s, especially with US trade tariffs weighing on demand. OPEC+ stressed that further increases depend on “evolving market conditions”, leaving room to reverse course if needed. Market watchers noted that limited selling pressure suggested the recent selloff was overdone, though doubts remain over whether members can actually lift exports given spare capacity limits and compliance issues. The decision also carries political undertones, with Saudi Arabia’s Crown Prince set to visit US in November as President Trump pushes for lower fuel costs to ease inflation.
Gold near record high as weak US job data fuels rate-cut bets. Gold hovered below its record high near USD3,600/oz, supported by weak US payroll data that showed slower hiring and the highest unemployment rate since 2021, prompting traders to price in nearly three Fed rate cuts this year. Gold, which has more than doubled in three years alongside silver, continues to benefit from safe-haven demand amid geopolitical and economic risks. Additional support came the People’s Bank of China’s tenth consecutive monthly increase in gold reserves, signalling sustained global demand for diversification away from the dollar.
MIDDLE EAST - CREDIT TRADING
End of day comment – 5 September 2025. Another day of big moves. We widened 2/3bp into NFP as there was street driven selling of long end bonds into the number. Post NFP and UST move, dealers bid bonds up but given its Friday and the usual inactivity around it, the price discovery process has probably still to go into Monday/ next week. On the +ve side ETFs had steady inflows pre and post number and high beta continued to outperform low beta as the search for yield is still on. In my space that manifested itself again with MOROC being bought, closing 42s +1pt/unch, 35s EUR+0.5pt/-2bp. Against this IG names widened out another 2/3bp post number. QATAR and ADGB long end constantly run into offers, ADGB 54s closing +0.625pt/+6bp and QATAR 50s +0.875pt/+4bp. KSA new issues were quiet for the record, but overall the KSA complex was 4/5bp wider as well.
MIDDLE EAST - MACRO / MARKETS
Fitch affirms Kuwait at ‘AA-‘ stable on strong assets. Fitch Ratings has affirmed Kuwait’s credit rating at ‘AA-‘, reflecting the country’s exceptionally strong fiscal and external balance sheets but also structural weaknesses tied to governance, oil dependence, and high welfare spending. Kuwait holds the strongest external balance sheet if any Fitch-rated sovereign, with sovereign net foreign assets forecast to rise to 607% of GDP in 2025, primarily via the Future Generations Fund. Recent reforms include a new financing and liquidity law, allowing debt issuance for the first time since 2017, with plans to raise KWD30bn over 50 years to ease reliance on the General Reserve Fund and support capital markets. While non-oil revenue remains weak at just 8% of non-oil GDP, Kuwait has introduced a 15% minimum tax on multinationals starting 2025 and plans to adopt GCC-wide excise taxes by 2027, though broader measures like VAT are unlikely soon. While vast sovereign assets provide a strong buffer, Kuwait’s heavy oil reliance leaves it vulnerable to price swings, with fiscal outcomes highly sensitive to shifts in global energy markets.
Foreign investment and SWFs as catalysts of GCC diversification. The recently published IMF working papers examined how foreign investment, particularly through sovereign wealth funds, are shaping economic diversification and growth across the Gulf Cooperation Council (GCC). Using deal-level data from 2000-2023, it finds that inward foreign investment has a far stronger impact on non-hydrocarbon GDP than domestic investment, tripling its effect over the medium term. SWFs, managing over USD4 trillion in assets, are increasingly aligned with national strategies by investing in advanced manufacturing, digital technologies, and renewable energy, both at home and abroad. While outward investments do not significantly boost domestic growth, SWF-led domestic investments show a meaningful positive effect. The study highlights two key post-pandemic shifts: a surge in service-sector investment (transport, ICT, logistics) and a rising focus on renewable energy projects. Ultimately, the paper underscores the need for GCC countries to strengthen institutions, improve business environments, and leverage international partnerships to fully realise diversification goals.
