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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 to multi-week high on Trump’s new Iran tariffs and supply risk. Oil prices climbed to their highest levels since November 2025 as markets reacted to President Trump’s announcement of a 25% tariff on goods from countries doing business with Iran, lifting Brent crude toward USD64/b and WTI near USD59/b after a more than 6% gain over the prior tariff threat, issued amid widespread protests in Iran that could jeopardise exports, as a fresh geopolitical risk premium, even though details on implementation remain unclear and Iran says the unrest has been contained. The potential for reduced Iranian supply has tempered earlier bearish sentiment driven by expectations of a global glut, while concerns persist that the tariff move could strain relations with major crude buyers such as China, which accounts for most of Iran’s oil exports. Markets are also balancing this with developments in Venezuela, where efforts to restore output continue, and other supply disruptions such as weather and geopolitical tensions affecting nearby producers.
Gold holds near record after Fed independence fears boost safe-haven demand. Gold steadied near around USD4,585/oz after surging about 2% on Monday as markets digested growing concerns over the Fed’s independence following threats of a criminal indictment against Chair Jerome Powell by the US Department of Justice, which investors view as political pressure on interest rate policy. Powell framed the move as part of sustained attempts by the President Trump administration to influence the central bank, reviving a “sell America” trade that weakened the dollar and boosted safe haven buying. Elevated geopolitical risk and central bank buying, which helped propel gold to successive record highs last year, have carried into 2026 amid ongoing monetary uncertainty.
MIDDLE EAST - CREDIT TRADING
End of day comment – 12 January 2026. Markets took the FED news relatively well to begin the day. What we did see though was still sellers in the long end, especially as UST curve steepened on the FED news. We also did see continued weakness in the OMMAN complex to start with long end bonds there at one stage offered down about 0.625pt. The afternoon though saw a recovery in macro risk and also a slight turn in flows. Long end bonds finally seem to find some yield buyers, take ADGB 54s trading at 100.50 in the morning but closing 100.75/101.00 (-0.125pt/-1bp). OMAN long end closed -0.375pt/+1bp also off the lows/wides. In the new issue space bonds were mostly static with one exception. New DHAENE 53s continues to attract buying interest and the street seems to struggle to cover bonds leading to a high lift/print at 100.875 in the afternoon. At this level though sellers stepped in and I am closing 100.625/100.875 (+0.5pt/-7bp). Other new issues like FABUH 31s or DUBAEE 33s are still hovering slightly above reoffer in cash price terms. Surprisingly the region didn't see any new issue announcement today, so macro markets will continue to be the main catalyst.
MIDDLE EAST - MACRO / MARKETS
Bahrain’s fiscal reform could stabiles debt, but execution risks remain high. Fitch Rating says Bahrain’s newly announced fiscal package has the potential to deliver meaningful consolidation, up to about 5% of GDP, through measures such as phasing out fuel, electricity and water subsidies, cutting administrative costs by 20%, introducing onshore corporate income tax and other levels, and increasing SOE dividends. Full implementation could help stabilise debt, which under Fitch’s baseline is projected to rise to 141% of GDP by 2027, with deficits near 9% of GDP and interest costs around a third of revenue. Fitch estimates Bahrain needs a primary surplus of 1% of GDP to stabilise debt, implying 4% of GDP improvement from the 2025 primary deficit. However, the agency cautions that Bahrain’s track record on fiscal delivery is weak, political constraints may dilute or delay reforms, and the debt path remains highly sensitive to oil prices, which account for over half of fiscal revenue.
Trump announces 25% tariff on countries trading with Iran. US President Trump said he is imposing a 25% tariff on goods from any country “doing business” with Iran, a move that would significantly escalate pressure on Iran amid weeks of widespread protests and growing political instability. The measure, which Trump said would take effect immediately, could disrupt major US trade relationships with countries including China, India, and Turkey, all key partners of Iran, and risks undermining recent trade understandings, particularly with China and India. The announcement comes as Iran faces its largest wave of unrest since 1979, sparked by a currency crisis and deteriorating economic conditions and met by a heavy security crackdown. Economically, the escalation risks further isolating Iran from global trade and finance, tightening pressure on its already weakened economy, reducing export revenues, particularly from oil, and exacerbating inflation, currency weakness and capital outflows at a time of severe domestic instability.
