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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 steadies as traders weigh supply glut fears against disruption risks. Oil prices steadied after their sharpest drop in nearly three weeks, with Brent trading above USD62/b and WTI near USD59/b, as investors awaited key market reports from the EIA, IEA, and OPEC to gauge the scale of a potential supply glut. Traders remain cautious after the IEA forecast a record oil surplus next year, while prices have been confined to a tight USD4 trading range since early November. Market sentiment is also influenced by possible changes to Russian export flows, with India, Russia’s largest seaborne crude buyer, expected to cut purchases, an issue likely to feature in US-India trade talks. Meanwhile, Ukrainian attacks on Russian energy infrastructure, including disruptions at the critical CPC Black Sea export terminal that also handles Kazakh shipments, continue to pose near-term risks to supply, offsetting concerns about longer term oversupply.
Gold holds steady as traders reassess 2026 rate outlook. Gold steadied around USD4,193/oz as markets looked past this week’s widely expected US rate cut to reassess the path of monetary policy into 2026, with rising Treasury yields and shifting expectations tempering momentum. While traders still anticipate a 25bps Fed cut, they have reduced forecasts for total easing through 2026 to two moves instead of three, reflecting growing uncertainty after comments from Fed chair candidate Kevin Hassett cautioned against outlining near-term rate plans. Despite the recent pullback from October’s peak above USD4,380, gold remains up roughly 60% this year, underpinned by robust central bank buying, strong ETF inflows, and ongoing expectations of further US policy easing, which continue to support prices even as higher interest rates typically weigh on non-yielding assets.
MIDDLE EAST - CREDIT TRADING
End of day comment – 08 December 2025. Rates moves continue to be the driver in this market with different outcomes in the curve. Whilst we continue to see 3-7y bonds well bid and on average 3/4bp tighter, the long end continues to underperform going out -1bp/+1bp in spread terms. Flow-wise the morning was constructive with ETFs continuing to buy, however flows turned as quickly once the UST move lower in the afternoon accelerated. On a side note a lot of short end bonds cleared today with yield buyers meeting 'funding sellers'. KSA had buyers in banks T2 following FITCH rating action to upgrade SNBAB/ RJHIAB, from Alinma to SNBAB cash prices were unch/+0.125pt on buying flows, spreads closed 5/7bp tighter. On the other end of the performance range long end IG bonds in ADGB/QATAR continued to see sellers and closed -0.5pt/+1bp. Besides OMAN got also upgraded by FITCH to BBB- but this was already well priced in, 47s closing -0.25pt/-2bp.
MIDDLE EAST - MACRO / MARKETS
Fitch upgrades Oman to investment grade on stronger fiscal and external position. Fitch Ratings upgraded Oman’s rating to 'BBB-' from 'BB+' with a stable outlook, citing sustained improvement in public and external finances and stronger confidence in the government’s prudent fiscal management despite a lower oil-price environment. Government debt has fallen sharply to an estimated 36% of GDP in 2025 from 68% in 2020, with deficits expected to remain modest at around 1% of GDP in 2026-2027, keeping debt broadly stable and well below the 'BBB' media. While hydrocarbon revenues still account for roughly 73% of total government income and weigh on the rating, external finances have strengthened significantly, with Oman becoming a net external creditor in 2024, improved sovereign foreign assets, and support from buffers such as the Petroleum Reserve Fund and the Oman Investment Authority’s future generations fund. Fitch also highlighted solid non-oil growth prospects above 3.5% driven by diversification, investment, and tourism, while noting risks from oil dependence and resizable state-owned enterprise debt.
UAE resilience and reform drive support strong 2025 outlook. The IMF’s 2025 Article IV Consultation concludes that the UAE continues to demonstrate strong economic resilience despite global uncertainty, with real GDP projected to grow 4.8% in 2025 and 5.0% in 2026, driven by both higher hydrocarbon output as OPEC+ quotas increase, and robust non-oil sector expansion in tourism, construction, financial services, and real estate, while inflation remains contained at around 1.6%-2.0%. Fiscal and external positions are comfortable with sustained surpluses, declining public debt, strong reserves, and a sound, well-capitalised banking sector, though the IMF advises close monitoring of rapid credit growth and buoyant property markets. Policy priorities centre on strengthening the medium-term fiscal framework, revenue diversification including the rollout of corporate income tax, deeper fiscal coordination across emirates and state entities, continued structural reforms to boost productivity and competitiveness, and integration of climate and data-quality considerations to safeguard long-term stability and inclusive growth.
