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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 slips as Iraq reroutes exports and Hormuz tensions persist. Oil prices edged lower, with Brent falling below USD103/b and WTI near USD95/b, as Iraq reached an agreement to resume exports through a pipeline to Turkey’s port of Ceyhan, bypassing the blocked Strait of Hormuz, and as the US intensified efforts to reopen the critical waterway by targeting Iranian missile sites. Despite this development, supply relief remains limited, with Iraq’s production at roughly one-third of pre-crisis levels and tanker traffic through Hormuz still largely restricted. The conflict continues to escalate, marked by Iran’s confirmation of a key security official’s death and ongoing attacks on energy infrastructure, keeping global oil supply tight and prices elevated, up nearly 70% this year. Rising fuel costs are adding to inflation concerns and drawing attention from central banks, though no immediate policy changes are expected. With no clear resolution in sight, oil markets are likely to remain volatile within a higher price range.
Gold hold steady as Fed outlook and Middle East risks offset each other. Gold traded in a tight range near USD5,000/oz as investors balanced expectations for the Fed’s policy path against rising inflation risks driven by the ongoing Middle East conflict. While the Fed is widely expected to keep rates unchanged, markets are focused on its guidance amid higher energy prices and signs of a softer labour market. Escalating tensions, highlighted by continued US and Israeli strikes, Iran’s retaliation across the Gulf, and disrupted shipping through the Strait of Hormuz, have intensified concerns over global energy supply and inflation, reducing the likelihood of near-term rate cuts. Although higher interest rate typically weighs on non-yielding assets, gold remains up about 16% this year, supported by persistent geopolitical uncertainty and growing stagflation fears, which reinforce its appeal as a long-term safe-haven.
MIDDLE EAST - CREDIT TRADING
End of day comment – 17 March 2026. GCC bond markets stabilised today. We opened with a good bid for long end bonds despite jittery global markets. Once macro risk turned positive that bid broadened out into the belly of the sovgn market and quasi sovgn bonds. Flows became much more two ways as well although overall sellers still outnumbered buyers today. Corps/ fins though still underperformed as the buying interest is mainly in sovgn bonds generally and benchmark bonds specifically. QATAR and ADGB long end closed -2bp and bonds about 0.5pt higher with main interest seen in QATAR 50s and ADGB 70s. OMAN didn't had much activity but closing the curve broadly unch and depending on the bond cash unch-0.25pt higher. Corps are still limping, but into the close saw ALDAR hybrids clearing and some account buying. At the lows they were 1pt down but recovered to close -0.25pt/+10bp. Quasi sovgn had mixed performance closing 1/3bp wider and cash anywhere from unch to 0.25pt higher. Seeing some interest in buying ADQABU 30s-35s from account side, QPETRO bonds on the other side still remain offered but are starting to clear.
MIDDLE EAST - MACRO / MARKETS
Egyptian Banks Resilient but FX‑Sensitive. According to Fitch Ratings, Egyptian banks are expected to remain broadly resilient to the Iran conflict’s indirect effects, supported by strong profitability, capitalisation and improved foreign‑currency liquidity, although a major depreciation of the Egyptian pound would pressure capital ratios. Fitch notes that risks to banks’ ratings hinge on Egypt’s sovereign profile, exposed to high energy import needs, remittance flows, subsidy costs and FX pressures, with the baseline assuming the conflict remains short and oil averages USD70/b in 2026. While portfolio outflows of over USD6bn since late February have weakened the currency, banks’ net foreign assets, at a 14‑year high, provide a substantial buffer, and reliance on foreign funding remains low. Capital adequacy is solid, though loan‑book dollarisation leaves CET1 ratios sensitive to further FX moves. Still, profitability should stay strong, with ROE above 20% aiding internal capital generation, despite expected moderation after 2025 rate cuts. Asset‑quality pressures may rise modestly due to weaker economic conditions, but robust provisioning built since 2022 should help contain risks unless the conflict proves far more prolonged or severe.
Alba cuts output to preserve stability amid supply disruption. Aluminium Bahrain (Alba) has initiated a controlled shutdown of Reduction Lines 1, 2, and 3, representing about 19% of its total production capacity, as a precautionary operational measure to manage supply and transit disruptions. The move allows the company to optimize raw material usage and concentrate production on its more efficient lines (4, 5, and 6), ensuring continued operational stability and resilience. At the same time, Alba will use the shutdown period to carry out maintenance and asset care, preserving equipment integrity for a smooth restart when conditions improve. Overall, the strategy reflects a proactive approach to managing supply chain risks, protecting working capital, and maintaining reliable output while minimizing operational and safety risks. Looking ahead, production is expected to normalise once supply conditions stabilise.
