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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 rise as geopolitical risks eclipse weak supply outlook. Oil prices climbed for a second straight day as escalating geopolitical tensions in Venezuela and the prospect of tougher US sanctions on Russia offset an otherwise bearish global supply and demand outlook. Brent crude briefly approached USD61/b before easing, while US benchmark WTI traded above USD56/b, supported by concerns that US’s blockade of sanctioned Venezuelan tankers and the risk of further disruption to exports could tighten supplies. Additional upside risks stem from potential new US sanctions targeting Russia’s energy sector if peach talks with Ukraine falter. Still, oil remains on track for a roughly 20% annual decline amid persistent worries that global supply will outpace demand, with market indicators across key regions continuing to signal underlying weakness despite the recent geopolitical driven rebound. Going forward, price dynamics are likely to remain volatile as markets balance heightened geopolitical risks against structurally weak demand and ample global supply.
Gold near record highs on Fed policy uncertainty and geopolitical tensions. Gold prices held near record highs as investors weighed rising geopolitical tensions in Venezuela against upcoming US inflation data that could shape expectations for Fed policy. Gold traded around USD4,340/oz, just below its October peak, supported by recent US rate cuts and continued uncertainty over the pace of further monetary easing. gold has surged nearly two-thirds this year, its strongest annual performance since 1979, driven by robust central bank buying, increased ETF inflows, and a broader retreat from government debt and major currencies. Heightened geopolitical risks, including US actions against Venezuela’s oil sector, have further reinforced gold’s appeal as a safe-haven assets.
MIDDLE EAST - CREDIT TRADING
End of day comment – 17 December 2025. Another mixed day. Whilst broader credit markets remain stable, the Santa Claus rally in risk assets has yet to materialise. My GCC markets overall remain in a tight range but with a widening bias. When UST fall markets adjust cash to the left, when UST recover prices remain sticky. One will have to admit it is becoming easier to buy bonds than to sell. All said the spread moves are really gradual and orderly. As I pointed out before year end liquidity plays a big part in these moves as well. Today’s session was weak in the morning with sellers out of the gate led by ETF accounts. Mostly long end and newly issued bonds got sold again. The afternoon was quieter and with the UST recovery some buyers stepped in. Cash prices are broadly closing in a -0.25/+0.125pt range and spreads flattish. One weaker spot today was SHJGOV/SHARSK which has seen selling across the curve closing -0.125/-0.5pt and +3/5bp. New SHARSK 36s issued end of November is now -2pt/+20bp from new issue level which reflects the steady risk off the market has seen especially for higher betas lately. Next market catalyst CPI tomorrow.
MIDDLE EAST - MACRO / MARKETS
UAE-Japan ties strengthened trough high-level Tokyo visit. The UAE Minister of Industry and Advanced Technology paid an official visit to Tokyo on December 16-17, holding high-level meetings with senior Japanese officials and leading private-sector executives to deepen UAE-Japan cooperation across energy, industry, advanced technology, and investment. Discussions with Japan’s foreign and economy ministers reaffirmed the strength of the Comprehensive Strategic Partnership, reviewed progress toward a Comprehensive Economic Partnership Agreement, and explored opportunities in conventional and renewable energy, trade, and technology. Meetings with major Japanese companies and institutions underscored growing public-private collaboration, as bilateral trade continues to expand, with total reaching USD49.6bn in 2024 and non-oil trade rising more than 21% y/y in the first nine months of 2025, reinforcing the UAE’s role as Japan’s leading Arab trading partner. This engagement comes as the UAE already has CEPAs in force with several Asian economies, including South Korea and India, while negotiations are ongoing with Japan and other Asian counties, highlighting Asia’s central role in the UAE’s trade strategy.
Israel approves landmark gas export deal with Egypt. Israel has approved a landmark USD35bn agreement to supply natural gas to Egypt from 2026 to 2040, marking the largest gas deal in the country’s history. The deal will see around 130 billion cubic meters of gas exported from Israel’s offshore Leviathan field, operated by Chevron, strengthening Israel’s position as a regional energy hub while providing Egypt with a more secure gas supply. Israel officials estimate the agreement will generate about ILS58bn in tax and royalty revenues and drive more than ILS16bn in infrastructure investment. For Egypt, which became a net gas importer in 2024 amid rising demand and falling domestic output, the long-term supply arrangement could reduce reliance on costly LNG imports over the coming years.
