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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 climbed on tanker seizure as geopolitical risks intensify. Oil prices extended gains after the US seized a sanctioned tanker off Venezuela, an action that raised the risk of broader tensions and discouraged additional shipments from the country. Brent moved above USD62/b and WTI hovered near USD59/b, reversing earlier losses, as the interception of the vessel marked a sharp escalation in US-Venezuela friction. The incident added to a series of recent attacks on vessels linked to Russia’s oil trade, deepening geopolitical risks even as the market faces a bearish fundamental backdrop, with rising output from OPEC+ and the Americas expected to outpace modest demand growth and create a supply glut. Upcoming reports from OPEC and the IEA may clarify the outlook.
Gold extends rally as Fed cut and softer outlook boost precious metals. Gold rose for a third straight day after the Fed delivered a widely expected 25bps rate cut, pushing gold near USD4,248/oz, while silver surged to a new record. The dollar and Treasury yields fell following the Fed’s decision, its third consecutive cut, with policymakers signalling only one more reduction in 2026 but adding language that suggested growing uncertainty about the future path of rates. Lower borrowing costs typically support precious metals, which offer no yield. Both gold and silver are heading for their strongest annual performance since 1979, with gold up more than 60% and silver more than doubling, driven by heavy central bank demand, rising ETF inflows, and investor shifts away from sovereign bonds and currencies. Sentiment was further lifted by the Fed’s plan to buy USD40bn in Treasury bills each month to rebuild financial system reserves, as well as expectations that the next Fed chair may favour a more dovish stance.
MIDDLE EAST - CREDIT TRADING
End of day comment – 10 December 2025. It was a nervy start and weak morning today. We saw sellers of AT1s (recently issued and short calls), recently new issued senior fins and long end bonds in general. With global rates market continuing to yield higher the market was reluctant to soak up this early selling. The last 2 hours though sentiment is turning, again UST driven. Some buyers emerged in long end bonds, in ADGB first to catch a bid is always 49s closing +0.375pt/unch. Other long end bonds though are anywhere from -0.125pt/+0.125pt and about 3bp wider on average. Higher beta today also got caught up in the selling, with mainly ETF outflows of OMAN, the curve there closing -0.125pt/-0.25pt and +4/5bp wider. On the fins side accounts tried to lighten up on recent new issues like BKMBOM 30s (-0.125pt/+3bp) and AT1s, new FABUH 5.875 perps closed -0.125/+3bp. The market will now be waiting for the FED, technicals feel balanced overall, but small flows are starting to have outsized price reaction as liquidity is drying up.
MIDDLE EAST - MACRO / MARKETS
Egypt inflation eases, opening door to possible rate cuts. Egypt’s inflation eased to 12.3% y/y in November from 12.5% y/y in October, offering a rare sign of relief despite the recent cut in fuel subsidies and other reform-driven pressures that have kept prices elevated. This slowdown comes as Egypt continues navigating the effects of sweeping economic reforms, including a 40% currency devaluation in March 2024 that helped unlock an expanded IMF package but also intensified cost pressures, alongside fuel price hikes of up to 14% and change to long-standing rental laws that contributed to October’s brief inflation uptick. Despite headline inflation falling far below its 2023 peak of 38%, it remains above the single-digit levels authorities hoped to achieve by now. The Central Bank of Egypt (CBE), which raised interest rates to record highs before easing by 625bps this year to reduce borrowing costs and support investment, paused the cycle last month, keeping the policy rate at 21.0% to maintain foreign investor interest in local debt. The latest inflation reading may give policymakers renewed confidence to resume cuts at the December 25 meeting as they balance disinflation with fiscal and external stability.
GCC central banks track the Fed’s latest rate cut. The FOMC cut rates for a third time at its last meeting of 2025 by 25bps, bringing the target range to 3.50-3.75%. In response, most GCC central banks, whose currencies are pegged to the US dollar, moved in lockstep to maintain monetary alignment and exchange-rate stability. Saudi Arabia lowered its reverse repo rate by 25bps from 400bps to 375bps, and repo rate by 25bps from 450bps to 425bps. The Central Bank of the UAE cut its base rate by 25bps to 3.65%, while Qatar reduced its lending and deposit rate by 25bps to 4.35% and 3.85% respectively. Bahrain trimmed its overnight deposit rate from 4.50% to 4.25%. Oman also followed with a repo reduction from 4.50% to 4.25%. Lastly, Kuwait Central Bank cut discount rate from 3.75% to 3.50%. going forward, the pace of future easing in the GCC will depend on the Fed’s policy path and the region’s ability to balance supporting growth with maintaining currency stability.
