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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 holds gains as Iran tensions and supply risks support prices. Oil steadied above USD70/b after its largest daily rise since October, supported by heightened geopolitical tensions and reports that potential US military intervention in Iran could come sooner than expected, raising concerns over disruptions to supply from the Middle East, which account for roughly a third of global oil output. Prices remained underpinned despite inconclusive US-Iran nuclear talks, with Iran indicating a general agreement on possible deal terms and negotiators expected to return to Geneva with a new proposal, while the US also imposed visa restrictions on Iranian officials following a crackdown on protests. Broader market dynamics also played a role, including a slowdown in Russian drilling that may curb output, limited progress in Ukraine peace talks, and a reported 609,000-barrel decline in US crude inventories, all contributing to a tighter near-term outlook even as political uncertainty and potential policy shifts continue to drive volatility.
Gold steadied amid Fed uncertainty and choppy post-rout trading. Gold stabilised near USD4,970/oz after a 2% rebound, as dip-buying emerged following a recent two-day decline and continued volatility after the sharp correction from its record high above USD5,595/oz. Trading remained subdued with some Asian markets closed for Lunar New Year, while investors focused on the Fed’s policy outlook after meeting minutes showed officials were cautious about cutting interest rates, even as political pressures for lower rates persist. A stronger US dollar, supported by solid industrial production and capital goods data, also limited gains, while ongoing geopolitical tensions and inconclusive US-Iran nuclear talks maintained gold’s appeal as a safe-haven asset despite the market’s recent choppiness.
MIDDLE EAST - CREDIT TRADING
End of day comment – 18 February 2026. Another subdued day in terms of volumes as local and Asian holidays held back activity. The spread tightening continued but with a bit of 'weakness' in the afternoon. Like yesterday ADGB continued to underperform in the long end with continuous selling seen in 54s closing -0.375pt/+0bp. What also found a break was SHARSK/ SHJGOV, especially SHJGOV found some selling in 36s and long end, that area of the curve closed up to 0.375pt lower and unch in spread, whereas front end remained well bid and closed -2bp. Quasi sovereign had a quiet day away from ENEDEV which squeezed higher in the new 36s closing +0.375pt/-6bp after what felt an endless underperformance post new issuance. In fins DHBKQD 31s held its gains from yesterday last trading at 98.875 up from 98.375 on Monday, today closing +0.125pt/-5bp. Corps had a quiet day, saw some selling of DPWDU 29s after the relief move higher post new CEO announcement, but cash still went out unch/-2bp.
MIDDLE EAST - MACRO / MARKETS
Saudi Arabi deepens AI push with USD3bn Humain investment in xAI. Saudi Arabia’s AI firm Humain has invested USD3bn in Elon Musk’s xAI as part of a USD20bn funding round completed shortly before xAI’s integration with SpaceX, giving Humain a significant minority stake that will convert into an estimated 0.24% ownership of the newly combined USD1.25 trillion entity. The deal underscores the Kingdom’s broader strategy to accelerate economic diversification beyond oil by positioning AI as a core growth sector, with Humain, backed by the PIF and established in 2025, actively expanding data centre infrastructure, compute capacity, and global AI partnerships. The investment also strengthens Musk’s tie with Sudi Arabia while providing xAI with a strategic regional partner and potential customer base for its Grok models, which the Kingdom plans to deploy alongside a previously announced 500MW data centre project. More broadly, the move reflects intensifying competition among Gulf sovereign wealth funds to secure influence in the global AI ecosystem, as regional investor increasingly channel capital into advanced technologies, infrastructure and model development to capture long-term economic and technological gains.
Morocco’s growth remains strong with low inflation and ongoing reforms. The IMF’s 2026 Article IV consultation found that Morocco’s economy remains resilient, with growth estimated at 4.9% in 2025 and projected to stay at the same pace in 2026, supported by strong agriculture, construction, services, and rising public and private investment, while inflation stayed low at 0.8% in 2025 and is expected to gradually rise toward 2% by 2027 as growth strengthens. Fiscal performance improved as tax revenues climbed to 24.6% of GDP, although higher public investment is likely to moderately widen the current account deficit, partly offset by tourism and FDI inflows, with reserves remaining adequate. The IMF noted that the broadly neutral monetary stance is appropriate given anchored inflation, while encouraging gradual exchange rate flexibility and continued finance sector reforms. Looking ahead, the Fund stressed managing fiscal risk and investing in human capital to sustain growth and resilience.
