To read the full report, please download the PDF above.
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 steady as Iran conducts naval drills ahead of US talks. Oil prices steadied after posting their strongest gain in a week, as geopolitical tensions resurfaced with Iran conducting naval drills near the Strait of Hormuz ahead of renewed negotiations with the US. Brent traded below USD69/b after rising 1.3% in the previous session, while WTI hovered near USD64/b. Iran’s Revolutionary Guard carried out exercises in the region of the Strait of Hormuz, a strategic chokepoint that handles roughly one-fifth of global oil flows, heightening market sensitivity to potential supply risks. Trading activity remained subdued, with Brent volumes falling to their lowest level this year amid public holiday in the US and Canada and Lunar New Year celebrations across parts of Asia. Diplomatically, Iranian Foreign Minister Abbas Araghchi met with the head of the International Atomic Agency and discussed proposals to be presented in indirect talks with US Special Envoy Steve Witkoff.
Gold extends decline below USD5,000 in this holiday trading. Gold fell further below USD5,000/oz in subdued trading conditions, with much of Asia closed for the Lunar New Year and US markets shut on Monday. Gold dropped as much as 1.4% on Tuesday after losing 1% in the prior session, reversing part of a brief rebound sparked by softer US inflation data that strengthened expectations of Fed rate cuts. Gold had surged to a record above USD5,595/oz in late January amid heavy speculative buying before plunging sharply in a two-day rout and has since recovered roughly half of those losses amid volatile trading. Despite the recent pullback, several major banks continue to project pullback, several major banks continue to project a renewed upward trend, citing ongoing geopolitical tensions, concerns about Fed independence, and a broader shift away from traditional assets such as currencies and sovereign bonds.
MIDDLE EAST - MACRO / MARKETS
IMF to review Egypt program as government prepares social support package. The IMF has scheduled Egypt for discussion at its February 25 Executive Board meeting to consider the fifth and sixth reviews under the USD8bn Extended Fund Facility (EFF) and the first review under the Resilience and Sustainability Facility (RSF), with approval expected to unlock approximately USD2.5bn under the EFF and USD274 million under the RSF, following a staff-level agreement reached in late 2025. The program remains centred on maintaining exchange rate flexibility, tight monetary policy to curb inflation, fiscal discipline, subsidy rationalisation, and reducing the state’s footprint in the economy through asset divestment and stronger private sector participation. Alongside the anticipated IMF disbursement, the government announced a social protection and spending package worth about USD830 million ahead of Ramadan, including ~USD165million in additional support for 10 million ration-card families, reflecting efforts to balance reform commitments with targeted social support.
Israel’s economy rebounds with 3.1% growth in 2025. Israel’s economy grew by 3.1% in 2025, surpassing projections of 2.8% and marking a recovery from the sharp slowdown caused by two years of conflict following the October 2023 war with Hamas and subsequent regional tensions involving Iran and allied groups. After expanding just 1% in 2024, the weakest pace in over two decades outside the pandemic, activity accelerated last year, supported by an 8.1% surge in gross fixed capital formation and a 6.1% rise in exports, while public expenditure increased by 1.7%. GDP per capital has returned to levels seen before the war. Growth momentum strengthened through the year, with third-quarter GDP revised sharply higher to a 12.7% annualised expansion as the economy rebounded from earlier military disruptions, followed by a 4% annualised increase in the fourth quarter. The central bank projects growth of 5.2% in 2026, reinforcing expectations of continued recovery. However, downside risks remain significant, including unresolved conflict in Gaza and uncertainty surrounding US-Iran negotiations, as any renewed regional escalation could weigh on confidence, disrupt activity, and slow the economic rebound.
Saudi Arabia’s inflation ease further in January 2026. Saudi Arabia’s CPI eased to 1.8% y/y in January 2026, down from 2.1% y/y in December 2025, signalling a continued moderation in price pressures at the start of the year. The slowdown reflects softer increases across key components of the consumer basket, particularly in housing, utilities, and transportation, which have historically been major contributors to h headline inflation. The January reading suggests that inflation dynamics remain subdued and broadly stable, supporting household purchasing power and reinforcing expectations of limited near-term inflationary risks within the Kingdom’s macroeconomic framework.
Turkeys January budget deficit widens as spending and revenues surge. Turkey recorded a budget deficit of USD4.9bn in January 2026, up 54.1% y/y, as expenditure and revenues both rose by about 55%. Spending reached USD37.6bn, with interest payments accounting for USD10.5bn, while revenues totalled USD32.5bn, driven by tax collection growth. Despite the wider headline deficit, the government posted a significant primary surplus of USD5.5bn. the rolling annual deficit stood at USD42.8bn.
