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 surges as US tightens pressure on Iran and Hormuz. Oil prices extended their rally, with Brent climbing above USD85/b for the first time in a month and WTI approaching USD80/b, after President Trump reinstated a naval blockade on Iranian shipping and announced that non-Iranian vessels transiting the Strait of Hormuz would be required to pay transit fees. The renewed restrictions threaten Iranian crude exports after Iran had briefly restored shipments during the earlier ceasefire, while attacks involving UAE tankers and Houthi missile launches toward Saudi Arabia highlighted the risk of a broader regional conflict. The latest developments have shifted market focus from oversupply concerns to the risk of prolonged disruptions to Gulf energy exports, with the duration of US enforcement measures and the security of Hormuz now likely to determine whether oil prices remain elevated.

Gold falls as rising oil prices reinforce higher for longer rate expectations. Gold prices remained under pressure, with bullion trading near USD4,010/oz, after escalating US-Iran tensions pushed oil and natural gas prices higher, raising concerns that persistent inflation could delay monetary easing. The renewed conflict, including tighter US measures on Iranian shipping through the Strait of Hormuz, has strengthened expectations that the Fed may need to keep interest rates higher for longer, with Fed Governor Christopher Waller signalling that further rate hikes could be warranted if inflation remains elevated. Investors are now awaiting US inflation data and Fed Chair Kevin Warsh’s congressional testimony for clearer guidance on the policy outlook. With inflation concerns intensifying alongside rising energy prices, the market’s focus has shifted from geopolitical safe-haven demand to the likelihood of further Fed tightening, creating a more challenging backdrop for gold in the near term.

MIDDLE EAST - CREDIT TRADING

End of day comment – 13 July 2026. A day punctuated by extremely limited volumes and utter indifference to President Trump making claims about charging cargo for passage through the Straits. Overall, the resumption of "hostilities" over the weekend has pushed oil back to levels not seen since last Wednesday. For the most part spreads didn't really react, though one dealer was keen to offer the Kuwait curve down that could just be a technical rather than a reaction to the fact that Kuwait is again looking at paying either the US or the Iranians taxes on everything they export. Under President Trump's threatened new regime Kuwait would end up paying something like USD13bn to the US per year for their exported products. For KSA and Kuwait, sovereign bonds are largely wrapped around unchanged in spreads with some notable bonds on offer in the GRE sukuk space after the SRCSUK issuance from last week. We saw some demand in the short end of PIFKSA but supply in the PIFKSA 56s. As mentioned KUWIB 35s are going out +4bps and we got hit in KFHKK 6.25 perps on the bid side moving those sukuks +4bps. (Source: Matthew Dunker, Credit Trader)

MIDDLE EAST - MACRO / MARKETS

Turkey’s current account deficit narrows on strong services exports. Turkey’s current account deficit narrowed sharply to USD1.46bn in May 2026, down from USD5.6bn in April and the smallest deficit since October 2025, supported by another strong performance in the services sector. A USD5.2bn services surplus, driven primarily by tourism and transportation, largely offset the USD4.3bn goods trade deficit, while the current account excluding gold and energy recorded a USD3.6bn surplus, highlighting the resilience of the country’s services exports. On a 12‑month basis, the current account deficit narrowed to USD37.3bn, with authorities describing the external position as sustainable and expecting further improvement. The data underscore the important role of tourism in cushioning Turkey’s external accounts when manufacturing activity remains weak and inflation remains elevated. Looking ahead, sustaining strong tourism revenues through the summer and a continued moderation in energy-import pressures will be crucial for maintaining the improvement in Turkey’s external balances, particularly as domestic demand and import pressures remain elevated.

UNCTAD: GCC remains a strategic investment hub despite regional headwinds. UNCTAD’s World Investment Report 2026 highlights the GCC’s growing importance in global investment. Based on 2025 FDI data, the UAE remained one of the world’s largest FDI destinations, attracting USD48bn in inflows and ranking ninth globally, while also remaining a top 10 source of outward investment. Saudi Arabia likewise remained a major FDI recipient, attracting USD25bn in inflows, while GCC sovereign wealth funds and state-owned enterprises continued to expand investments in AI, digital infrastructure, energy, real estate and other strategic sectors. Looking ahead, UNCTAD notes that heightened geopolitical tensions could weigh on investment activity by increasing uncertainty, transport costs and project delays. Nevertheless, the GCC’s strong fiscal buffers, active industrial policies and continued focus on high-value sectors should help preserve its position as a resilient global investment hub.