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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 slides for second week as oversupply fears dominate. Oil prices were set for a second consecutive weekly drop as mounting concerns about an emerging supply surplus overshadowed risks of potential disruptions. Brent traded below USD60/b, down more than 2% on the week, while WTI hovered around USD56/b, with major traders broadly expecting an oversupplied market early next year. Oil has fallen roughly 20% this year as OPEC+ unwound production cuts faster than expected, output increased elsewhere, and demand remained subdued, though geopolitical risks linked to Russia and Venezuela have helped limit losses. With trading volumes thinning ahead of the Christmas New Year holidays, market liquidity has declined, raising the risk of volatile price swings, while new UK sanctions on smaller Russian producers added another layer of uncertainty to an already fragile market backdrop.
Gold and silver hold near record highs on Fed rate-cut and safe-haven demand. Gold and silver hovered near record highs as slower than expected US inflation reinforced expectations for further Fed rate cuts, boosting demand for non-yielding previous metals, while platinum climbed close to a 17-year peak. Gold traded around USD4,330/oz and was on track for a second weekly gain, supported by the slowest rise in core US inflation since early 2021, strong central-bank buying, and continued inflows into billion-backed exchange-traded funds, alongside elevated safe-haven demand amid geopolitical tensions. Silver was also remained near record levels after more than doubling this year, while platinum extended a seven-session rally on signs of tightening supply in the London market and robust Chinese demand, with precious metals broadly set for their strongest annual performances since the late 1970s despite uncertainty over the pace of future US monetary easing.
MIDDLE EAST - CREDIT TRADING
End of day comment – 18 December 2025. The market opened a bit nervy in the morning with more risk off moves overnight. However things quietened down fast and the rest of day was rather uneventful in terms of flows. The market will be relieved about the CPI numbers, but higher UST prices widened spreads on the well-known price stickiness of GCC bonds. The main IG sovgn are about 0.125/0.25pt higher and +1/2bp. The quasis sovereign and fins space closed flattish in price terms and +3/5bp. One notable underperformer remains the SHJGOV/ SHARSK curve. That are the only bonds I had to take lower in cash price terms today as selling persists and no one want to put bonds in the book ahead of year end. Have the curve there anywhere from unch/-0.25pt and +5/8bp. In terms of flows selling flows outnumbered buying flows again with ETFs selling the same bonds as yesterday. But with no major macro risk moves and numbers out, it starts to feel like festive season has started today.
MIDDLE EAST - MACRO / MARKETS
Kuwait’s reform drive gains momentum under Vision 2035. According to the IMF, Kuwait is stepping up its transition from an oil-dependent welfare state toward a more dynamic and diversified economy under Vision 2035. Economic activity is recovering, with real GDP expanding by 1.7% y/y in Q2 2025, while inflation has moderated to around 2.4%, reflecting stable macroeconomic conditions. Despite weaker oil revenues, fiscal performance has improved, with the central government deficit narrowing to 2.2% of GDP in FY2024/2025 and the general government posting a sizable surplus at 27.7% supported by sovereign wealth fund investment income, alongside Kuwait’s return to domestic and external bond issuance after nearly a decade. The external position remains strong, with a large current account surplus and ample reserves, although it remains structurally weaker than implied by fundamentals due to heavy reliance on hydrocarbon. Looking ahead, authorities are pursuing gradual fiscal consolidation of about 1% of GDP per year, alongside structural reforms to unify the labour market, improve the business environment, deepen financial markets, and upgrade economic statistics, aiming to support sustainable non-oil growth, preserve financial stability and ensure long-term intergenerational equity.
Iran’s rial slumps to near record lows amid sanctions and inflation pressures. Iran’s rial (IRR) fell to near record lows against the dollar this week, underscoring deepening economic strains from sanctions, high inflation, and shrinking foreign-currency inflows. The currency traded just under 1.3 million rials per dollar on Iran’s open market, closet to all-time lows, after a year of sharp depreciation driven by intensified international sanctions and renewed regional tensions. Since the US withdrew from the nuclear deal in 2018, the rial has lost more than 95% of its value, a slide that has accelerated with declining oil export revenues, rising fuel prices, persistent inflation, and stronger demand for dollars as importers settle year-end trade obligations. Iranian officials have warned that continued tensions could further weaken the currency and stoke inflation, highlighting the challenges of managing the economy amid parallel exchange rates and ongoing external pressures.
