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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 prices edge higher amid thin trading and oversupply concerns. Oil prices rose modestly from their lowest levels in nearly two months, supported by stronger Chinese oil demand, even as concerns over a growing supply glut continued to weigh on the market. Brent crude hovered near USD62/b and WTI around USD58/b in thin trading ahead of the Christmas and New Year holidays, with below-average volumes amplifying price swings. While China’s oil demand and refinery activity in November exceeded year-earlier levels, broader economic indicators remained weak. Crude is on track for an annual decline as OPEC+ and other producers increase output despite soft demand growth, with signs of oversupply emerging in Middle Eastern crude markets. At the same time, geopolitical risks, including continued attacks on Russian energy infrastructure, maritime seizures involving Iran and Venezuela, and heightened US pressure on the Maduro regime, have added a modest risk premium, contributing to choppy market conditions.
Gold steadied as Fed uncertainty cools rate cut expectations. Gold prices stabilised near USD4,310/oz after four consecutive days of gains, as conflicting messages from US Fed officials prompted investors to scale back expectations for further monetary easing next year. Although the Fed delivered its third consecutive rate cut last week, dissent from several policymakers and lingering concerns over inflation and delayed economic data introduced uncertainty over the pace of future cuts. Despite the near term pause, gold remains up more than 60% this year, on track for its strongest annual performance since 1979, supported by sustained central bank purchases, rising holdings in gold-backed ETFs, and investor rotation away from sovereign bonds and currencies.
MIDDLE EAST - CREDIT TRADING
End of day comment – 12 December 2025. A quiet Friday in terms of activity with reasonably balanced flows. But risk off macro markets are starting to grip GCC as well. Today the main driver of price action was the UST steepening with a lot of weakness in long bonds. That led GCC long end bonds to be offered down aggressively with little bid side support. Especially ADGB long end was for sale where 47s underperformed closing -0.875pt/+1bp. Then we started to see some late day selling in higher beta credits, namely OMAN, cash there closes -0.125/-0.625pt and about unch in spread, but has a heavy feel going out. Quasi sovereign IG markets were the outperformer today, there is still interest in adding intermediate bonds in the likes of ADGLXY, ADNOCM or QPETRO. Fins are somewhat becoming illiquid and only the best names like FABUH saw some trades today, the feeling there is that the market is still sitting on new issue bonds without finding an out.
MIDDLE EAST - MACRO / MARKETS
Saudi inflation falls to nine-month low as food and rent pressure ease. Inflation in Saudi Arabia fell from 2.2% y/y in October to 1.9% y/y in November driven by easing price pressures in key components, particularly food and housing. Food and beverage inflation, the largest weighted category in the CPI basket, decelerated to 1.3% after four months of acceleration, while housing, water, electricity and gas inflation eased to 4.3%, its slowest pace in more than three years, reflecting a continued slowdown in residential rents, especially in Riyadh, following government measures to rebalance the real estate market and freeze rent increases. Transport prices also softened, and core inflation fell to 2.2% y/y, its lowest level since reporting began. Looking ahead inflation is expected to remain well contained near the 2% range over the medium term, supported by moderating rent growth and stable price dynamics across most regions.
China Seeks UAE Support to Accelerate GCC-China FTA. China has reaffirmed its commitment to deepening strategic and economic ties with the GCC and is looking to the UAE to help accelerate negotiations on a long-pending GCC-China FTA, according to Chinese Foreign Minister Wang Yi. During meetings in Abu Dhabi with GCC Secretary General and UAE Foreign Minister, Wang highlighted the growing importance of GCC-China relations since the first GCC-China Summit in 2022 and said conditions are now ripe to conclude the FTA after more than two decades of talks. He expressed China’s support for the UAE’s role in safeguarding national security and development and for its expanding influence in regional and international affairs, calling for deeper cooperation in traditional sectors such as trade, investment, oil and gas, and infrastructure, alongside new areas including renewable energy, technological innovation and digitalisation. Wang also said China stands ready to work with the UAE and GCC within multilateral frameworks to uphold multilateralism and free trade and strengthen Global South cooperation. In response, UAE Foreign Minister said the UAE places relations with China at the forefront of its foreign policy and is willing to play a positive role in advancing the GCC-China FTA, as both sides seek to translate strategic alignment into concrete economic outcomes.
