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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 near multi-year highs as Hormuz crisis and Trump ultimatum escalate risks. Oil prices hovered near their highest levels since mid-2022, with Brent approaching USD113/b and WTI near USD99/b, as markets reacted to escalating tensions between the US and Iran centred on the Strait of Hormuz. President Trump issued a 48hour ultimatum demanding Iran reopen the critical waterway or face attacks on its power infrastructure, while Iran warned of broader retaliatory strikes across the region. The conflict has driven Brent up more than 50% since late February, with disruptions to shipping and near-total closure of Hormuz severely constraining global supply. Despite emergency stockpile releases and temporary easing of restrictions on Iranian oil already at sea, supply remains tight as Gulf producers rely on limited alternative routes. The crisis has intensified inflation concerns and heightened volatility across financial markets, while uncertainty around US strategy and continued military escalation suggest oil prices and geopolitical risks will remain elevated.
Gold slides as rising rates and war pressures erase grain. Gold fell sharply, dropping as much as 3.8% to around USD4,320/oz and nearly wiping out its gains for the year, as the tensions between the US and Iran escalated. Surging oil prices have fuelled inflation concern, reducing expectations for near-term interest rate cuts and weighing on non-yielding gold, which has recorded its steepest weekly loss since 1983. The selloff has also been driven by forced liquidation as investors cover losses in other markets aid heightened volatility across commodities and equities. Despite the downturn, technical indicators suggest gold is now oversold, and historical patterns indicate such declines during macro shocks are often followed by sustained rebounds, with speculative positioning already increasing in anticipation of a recovery.
MIDDLE EAST - CREDIT TRADING
End of day comment – 20 March 2026. This time though not really GCC or credit specific, this time rates specific. Volumes were low, the market is frozen these days on a Friday like we know from the last couple of weeks. Oil and gas prices stabilised, and one could have thought it could be a quiet day with little news flow around the war and overnight Israeli assurance not to target energy infrastructure anymore. Then came the rates market where more and more rate hikes are getting priced into G3 bonds. The UST was left out of this move recently but since the FED repriced as well towards hike and fast. If you price your bonds by hand today was the day where you restarted taking prices down once you were at the end of the list. We marked SHARSK/SHJGOV +3bp but I didn't see a print today. In terms of curve moves the outperformance from short/belly bonds yesterday was reversed today with this part of the curve around 0.125/0.375pt lower and +3/5bp.
MIDDLE EAST - MACRO / MARKETS
Global energy crisis deepens as LNG halts and oil reroutes. The Middle East conflict has triggered a severe global energy shock, with LNG supplies from the Gulf set to effectively halt within days due to the closure of the Strait of Hormuz and damage to Qatar’s Ras Laffan facility, sending gas prices soaring and leaving import-dependent countries, especially in Asia, facing acute shortages, rationing, and soaring costs. As nations scramble for expensive alternative supplies or revert to dirtier fuels, global LNG markets are tightening sharply with limited immediate relief. At the same time, Saudi Arabia has activated its long-prepared contingency strategy, ramping up oil export via the East-West pipeline to the Red Sea port of Yanbu, partially bypassing Hormuz and stabilizing some crude flows. While this pipeline has emerged as a critical buffer preventing an even greater oil supply crisis, it cannot fully offset disruptions and remains vulnerable to attacks, highlighting both the fragility of global energy systems and the growing urgency for alternative routes. Together, collapsing LNG flows and constrained oil logistics underscore a deepening and potentially prolonged global energy crisis with widespread economic and inflationary consequences.
Lebanon’s public wage dilemma. According to the latest IMF’s Technical Assistance Report, public sector wage system has been severely disrupted by overlapping crisis since 2019, which sharply reduced the real value of salaries, weakened public services, and led to a fragmented compensation structure based largely on temporary allowances rather than stable base pay. The report outlines a medium-term framework for managing personnel spending, projecting a gradual recovery from USD2.7bn in 2025 to about USD3.4bn by 2029 under a baseline scenario, though still below pre-crisis levels. However, fiscal space remains extremely limited due to rising pension and security-related costs, meaning significant wage increases are only possible with new revenues or spending cuts elsewhere. Lebanon must adopt a fiscally sustainable and equitable wage strategy-centred on better data, coordinated policymaking, structural reforms, and prioritisation within a clear medium-term budget framework, to restore public sector effectiveness without jeopardising fiscal stability.
