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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 surges after US strikes Iran’s nuclear sites. Oil prices jumped sharply after the US struck Iran’s nuclear facilities at Fordow, Natanz, and Isfahan, raising fears of supply disruption from the Middle East. Brent surged up to 5.7%, briefly hitting USD81.4/b, before paring gains. Iran warned of “everlasting consequences” prompting concerns over a potential closure of the Strait of Hormuz or attacks on regional infrastructure and Red Sea shipping via Houthi proxies. With no physical supply disruption occurring yet, markets remain tense. The situation also puts pressure on OPEC+ producers, who still hold spare capacity. Traders now await Iran’s response, which could determine the next major move in oil prices.
Gold slips as markets await Iran’s response to US-Israel strikes. Gold eased 0.2% to USD3,361/oz, reversing earlier gains, as investors awaited Iran’s response to US and Israeli attacks on its nuclear sites. While geopolitical tensions typically boost gold, a stronger dollar and rising oil prices, which could delay Fed rate cuts, are limiting gains. Despite the slight dip, gold remains up nearly 30% YTD, supported by geopolitical uncertainty and expectations of looser monetary policy. At the same time, any significant oil-driven inflation could reduce gold’s appeal by keeping rates elevated. While bullion is still trading close to its record highs, traders appear cautious, balancing safe-haven demand with shifting interest rate expectations.
MIDDLE EAST - CREDIT TRADING
End of day comment – 20 June 2025. Every bond price seemed to move on its own depending on technicals and the latest flows. Activity was above average for a Friday. The morning was heavy despite overnight news of President Trump giving his decision whether or not to participate in military action against Iran a grace period of up to 14 days. Whilst macro markets bounced, GCC bonds still got sold from dealers, RM and ETFs. Once the selling flow ebbed in the afternoon bonds stabilised and ETFs turned small buyers. At eod spreads closing anywhere from -1bp to +7bp. The widening in sovereign was led by Qatar with selling across the curve, some belly bonds underperforming like 30s closing -0.20pt/+7bp with the QATAR curve generally 4/7bp wider. ADGB had more support but also closed 2/5bp wider. Against this high beta credits did better, especially OMAN which didn't had morning sellers and saw small buying in the afternoon, 47s closing +0.375pt/-1bp. Away from sovereign DPWDU continued widening on concerns about trade flows closing +5/7bp across the curve with sellers mainly in 28s and new 35s.
MIDDLE EAST - MACRO / MARKETS
Qatar eyes USD3.5bn tourism investment to support Egypt’s economy. Qatar is in advanced talks to invest USD3.5bn in a tourism project on Egypt’s Mediterranean coast, with a deal possibly signed by end-2025. This investment would add to growing Gulf support for Egypt, which has been hit by economic challenges and regional instability, including Israel’s recent conflict with Iran and disruptions to Israeli gas supplies. Qatar’s investment would be fresh liquidity, unlike Kuwait and the UAE’s approaches, which involved converting central bank deposits into investments. Meanwhile, no Saudi deals are expected this year, despite earlier plans. Egypt is actively seeking foreign capital to support its economy, backed by a USD57bn bailout involving the IMF and EU, and is pledging to reform its import-heave economy.
Turkey held rates at 46.00%, signals possible cuts amid easing inflation. Central Bank of Turkey (CBRT) held its key interest rate steady at 46.00%, but signalled possible rate cuts if inflation keeps falling and geopolitical risks ease. Inflation slowed to 35.4% in May, with further easing expected. The CBRT cited weakening domestic demand and dropped previous tightening language. The move follows a surprise 350bps hike in April and comes amid concerns over rising oil prices due to the Israel-Iran conflict, which could challenge the bank’s 24.0% year-end inflation target. Looking ahead, the CBRT is likely to remain data-dependent, we view the CBRT will restart its cutting cycle in July when inflation will have fallen to 32.0% y/y (based on our estimates), providing an adequate real rate buffer.
