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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 on Venezuela blockade risk, though oversupply pressures persist. Oil prices rebounded from their lowest levels since 2021 after US President Trump ordered a blockade of sanctioned tankers entering and leaving Venezuela, heightening concerns over potential supply disruptions. Brent crude climbed above USD59/b, while WTI traded near USD56/b, recovering after several sessions of sharp losses driven by expectations of a swelling global surplus. The move marks a significant escalation in US pressure on Venezuela and follows the recent seizure of a tanker, raising the risk that prolonged disruptions could affect exports of roughly 590,000 barrels per day, most of which are destined for China. Nevertheless, oil markets remain weighed down by structural oversupply concerns, as OPEC+ rapidly restores idled production, other producers increase output, demand remains tepid, and a potential Ukraine peace deal could ease curbs on Russian crude, leaving prices on track for an annual decline.
Gold rises on inflation watch and geopolitical tensions. Gold edged closer to a record high as investors focused on upcoming US inflation data and escalating geopolitical tensions. Bullion climbed above USD4,325/oz, rebounding from a modest pullback, with markets closely watching tomorrow’s inflation release and comments from Fed officials for signals on the outlook for further rate cuts after the Fed’s third consecutive easing move last week. Gold also drew support from rising geopolitical risks after President Trump ordered a blockade of sanctioned Venezuelan oil tankers, intensifying pressure on the Maduro regime amid heightened military tensions. Gold is up roughly two-thirds this year and on track for its strongest annual performance since 1979, underpinned by strong central bank buying, investor diversification away from government bonds and major currencies, and its enhanced safe haven appeal.
MIDDLE EAST - CREDIT TRADING
End of day comment – 16 December 2025. Another day of slightly wider spreads. The morning started constructive with some buying interest in recently underperforming sectors like long end bonds or new issues. But it became clear on higher clearing levels that the market has bonds to go and is happily providing them to buyers. Subsequently long end bonds got offered down again. Midday the market went into wait and see mode ahead of the numbers which came out broadly as expected. USTs are strengthening into the close but offers in cash remain sticky and on average we close 2/3bp wider again. One credit which saw a bit more activity than usual was OMAN, where long end bonds came out, 48s were most active closing -0.375pt/+3bp. I wouldn't just yet connect this to the oil price move but the break of 60 in Brent got a lot of attention today and whilst probably not the main price driver today, oil weakness from here might start to affect GCC credits and Oman is a bit more sensitive to oil prices than others. Overall going out the market feels heavy again.
MIDDLE EAST - MACRO / MARKETS
EGA seeks partners for major US aluminium smelter investment. Emirates Global Aluminium (EGA) is seeking equity partners for its planned aluminium smelter in Oklahoma, a project expected to require USD5bn-6bn in investment and produce around 750,000 tons of primary aluminium annually. The UAE-owned producer, one of the world’s largest aluminium makers, is in early-stage discussions with potential investors including Mitsubishi Corp. The project, known internally as “EGA Inola”, aligns with President Trump’s push to attract foreign investment into US industry and reduce reliance on aluminium imports, which account for roughly half of US consumption. While higher tariffs have lifted aluminium prices, they have also increased costs and disrupted supply chains, and EGA’s plans hinge on securing a competitive long-term power agreement, as electricity accounts for more than half of aluminium production costs amid intensifying competition for power from data centres.
Morocco maintains policy rate as it prepares for inflation targeting. Morocco’s central bank held its benchmark interest rate steady at 2.25% at its latest quarterly meeting, underscoring a cautious policy stance as the country prepares to transition toward an inflation-targeting framework. The decision reflects still-elevated uncertainty stemming from global geo-economic tensions and domestic weather risks, particularly persistent drought that weighs on the agriculture sector. The pause follows three rate cuts since mid-2024 and reflects policymakers’ assessment that earlier easing has not yet fully transmitted through the economy, despite inflation slowing sharply to 0.1%, its lowest level in four years. The decision also aligns with a pause in Eurozone rate cuts and supports policy flexibility ahead of the planned trial of inflation targeting in 2026, alongside gradual foreign exchange liberalisation. At the same time, the central bank revised up its 2025 growth forecast to 5% while lowering its inflation outlook for 2025 and 2026, and projected a contained current account deficit of 1.8% of GDP in 2025, remaining below 2% through 2027. Public debt is expected to decline to 64.5% of GDP by 2027, signalling improving macroeconomic fundamentals.
