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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 extends rally as Iran unrest sparks supply risk premium. Oil prices held their largest two-day gain since October as escalating protests in Iran threatened supply from OPEC’s fourth-largest producer, lifting Brent crude toward USD63/b and WTI near USD59/b. markets are closely watching the largest nationwide demonstrations in Iran since 2022, which have sparked concerns about possible disruptions to nearly 2mb/d of exports and have drawn comments from President Trump that the US is monitoring the situation and considering strong options. The heighted geopolitical risk has tempered bearish sentiment driven by global surplus fears, though the anticipated recovery of Venezuelan output and broader oversupply outlook continue to cp price gains. The unrest has also shifted some market focus away from Venezuela, where the US is engaging major oil firms on rebuilding efforts, even as diplomatic and regional tensions add to the complex backdrop for crude markets.
Gold climbed to record due to Fed independence fears and Iran unrest. Gold surged to nearly USD4,600/oz, setting a new record as markets reacted to an unprecedented threat by the US Justice Department to pursue a criminal indictment against the Fed, raising fresh concerns over its independence, and to intensify Iran protests that heightened geopolitical risk. Fed Chair Jerome Powell framed the threat as part of broader political pressure on monetary policy, undermining confidence in the US dollar and boosting safe-haven interest, while continuing unrest in Iran and statement by President Trump kept haven demand elevated. The rally follows as strong 2025 performance underpinned by rate cuts, central bank buying, and ETF inflows, and market focus remains on upcoming US data and policy signals that could sustain previous metal’s appeal.
MIDDLE EAST - CREDIT TRADING
End of day comment – 09 January 2026. KSA curve is hitting the 2nd day as mostly unchanged to a tick tighter in the 5yr point. STCAB was quite active with 31s and 36s starting around reoffer but getting pounded wider with Asian based flippers, though we did place a fair amount of bonds into a few locals and we expect that to pick on Monday when they are all back in the office. For Bahrain, no one likes holding BHRAIN when the market is a bit squishy and the past two days are no exception. We marked the curve +8-10 yesterday and was able to leave cash prices unchanged today so a mild tightening followed. For Turkey, this space has been bullet proof recently but on very little volume. Now that the sovereign has issued and the first bank printed today with little trading or fanfare. We moved bonds that the street isn't short/investors don't love +5bps or so today, but the blue chips are holding in on cash for now. One thing to watch is the T2/AT1 space as it seems to be capital raising time of year and these absolute coupons, both in the 7% range, have got to be enticing.
MIDDLE EAST - MACRO / MARKETS
Egypt inflation stalls in December, opening door to further rate cuts in 2026. Egypt’s inflation rate held steady in December, strengthening the case for further monetary easing next year as policymakers seek to support growth after a prolonged tightening cycle. CPI remained at 12.3% y/y, unchanged from November, while monthly inflation slowed to 0.2%. The reading comes after inflation peaked at a record 38% in September 2023, triggering a USD57bn international bailout, and has since more than halved despite pressure from IMF-backed subsidy cuts and higher rents. The central bank expects inflation to continue easing in 2026, with no further fuel price hikes planned until October, while food prices, the largest component of the basket, rose just 1.5% y/y and fell on a monthly basis. Lower inflation enabled the central bank cut rates by a cumulative 725bps late this year, bringing the benchmark deposit rate to 20%. Going forward, we expect a further 650bps of easing this year to support private investment and ease the government’s debt burden.
UNCTAD: MENA growth recovery led by oil exporters, shadowed by geopolitics. According to a report by UNCTAD, World Economic Situation and Prospects 2026, the MENA region is projected to see a strengthening growth recovery, with regional GDP expected to expand by about 4.1% in 2026 and 4.0% in 2027, up from an estimated 3.4% in 2025. The improvement is driven mainly by oil-exporting economies, which are set to benefit from the unwinding of OPEC+ production cuts and continued efforts to diversify into non-oil sectors such as manufacturing, logistics, tourism, and services. Easing inflation and supportive macroeconomic policies are expected to underpin domestic demand across much of the region. However, geopolitical tensions, ongoing conflicts, and security risks continue to weigh on investor confidence, trade and tourism, while Turkey’s growth is expected to remain moderate amid subdued demand, policy tightening, and large external financing needs. Overall, MENA’s medium-term prospects will depend on sustaining reform momentum, accelerating diversification, and navigating an increasingly uncertain global and regional environment.
