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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 volatility amid escalating US-Iran tensions and Hormuz pressure. Oil prices fluctuated as geopolitical tensions intensified following a US strike on military facilities at Khar Island, Iran’s main oil export hub. Brent traded around USD104/b and WTI near USD98/b after earlier gains, with prices up more than 40% over the past two weeks. Despite the attack, Iran said exports from Kharg Island were continuing, while also launching retaliatory strikes on Israel and warning of potential attacks on locations in Doha and Dubai hosting US forces. The conflict has severely disrupted global supply with traffic through Strait of Hormuz nearly halted and the IEA describing the situation as the largest supply disruption in oil market history. Meanwhile, the UAE briefly suspended operations at Fujairah after a drone strike, though activities resumed later. To ease supply shortage, the IEA has begun coordinating an unprecedented 400mb emergency stockpile release, with Japan starting shipments and the US preparing to release part of its 172mb commitment.
Gold volatile as Middle East war and rate expectations shape markets. Gold fluctuated around USD5,000/oz as investors balanced a weaker US dollar against persistent geopolitical risks from the ongoing US-Israel conflict with Iran. Prices briefly fell about 1%, pressured by rising energy costs and inflation concerns linked to the war, though the softer dollar and retreat in crude prices offered support. Uncertainty over the conflict’s duration, potentially lasting 4-6 weeks, continues to cloud market outlooks, particularly as attacks on Iran’s key oil export hub and energy infrastructure have disrupted supplies and kept traffic through the Strait of Hormuz largely halted. At the same time, expectations for near-term US interest rate cuts have faded as inflation risks rise, with traders seeing almost no chance of a Fed cut this week.
MIDDLE EAST - CREDIT TRADING
End of day comment – 13 March 2026. We had seen this last Friday, as volumes remain low and no one wants to warehouse risk over the weekend. Indeed, the worst two trading days were this Monday and Monday last week, so the market is very worried about an escalation over the weekend. Macro markets recovered somewhat around midday, but GCC bonds remained wider throughout the day. Today’s steepening of the UST curve led to a flattening of credit curves, these spread moves indeed adjust over a couple of days as the tightening of short to medium term bonds yday reversed with a substantial widening today. Client flows look like 25% of a normal day today, sellers/ buyer’s ratio again 2:1 but in terms of request it felt like 99:1. A lot of bonds failed to clear. ADGB closed +5bp with long end bonds seeing some prints about 0.75pt lower from yday. QATAR equally +5bp but here there wasn't much of activity and bonds just got offered down in line with the market. Oman which had outperformed lately started to crack a bit today, seen RM and ETF selling, closing 48s -1pt/+7bp. In quasi sovgn bonds ADNOCM 34s found some support and cleared in good size closing -0.375pt/+2bp. Other ADGB and Qatari names closed more like +5bp in line with the sovgn. There is still a price discovery process away from sovgn/quasis, especially in corps. Today Fitch puts Binghatti on RW-ve, the first victim of the crises.
MIDDLE EAST - MACRO / MARKETS
Israel’s annual inflation reaccelerates to 2.0% in February. Israel’s February CPI rose to 2.0% y/y, up from 1.8% y/y in January, keeping inflation within the Bank of Israel (BoI)’s 1–3% target range but showing renewed upward pressure driven by increases in fresh fruit, travel abroad, culture and entertainment, and housing‑related costs, while declines in clothing, fresh vegetables, and some household goods helped offset the rises. The data release also noted that home prices continued their broader downward trend, falling 0.1% over the Dec 2025–Jan 2026 period and 0.9 y/y, adding context to overall price‑level dynamics. Going forward, inflation is expected to remain within the BoI’s target range, but the ongoing regional conflict could introduce upside risks through higher transportations costs, supply disruptions, and currency volatility, potentially complicating the BoI’s monetary policy outlook.
S&P affirms ratings across GCC sovereigns and emirates. S&P Global Ratings reaffirmed the sovereign ratings of several Gulf economies, including Qatar (AA/stable), Saudi Arabia (A+/stable), Bahrain (B/stable), Ras Al Khaimah (A/stable), and Sharjah (BBB-/negative), reflecting generally strong fiscal and external positions across the region despite heightened regional uncertainty. The stable outlooks for most issuers highlight the support of sovereign wealth assets, fiscal buffers, and economic diversification efforts, particularly in Qatar, Saudi Arabia, and Ras Al Khaimah, while Bahrain remains constrained by high public debt and fiscal deficits, and Sharjah faces pressures from government-related entity debt and refinancing needs. Overall, S&P expects GCC economies to remain broadly resilient, supported by strong balance sheets and policy flexibility, though fiscal sustainability and diversification progress will remain key drivers of future credit profiles.
