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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 rises as Iran deal talks resume amid military tensions. Oil prices advanced, with Brent climbing above USD72/b and WTI near USD67/b, as markets assessed the outlook for renewed US-Iran nuclear negotiations alongside escalating geopolitical tensions. President Trump reiterated his preference for a diplomatic resolution but warned of severe consequences if no agreement is reached, while talks are set to resume in Geneva alter this week. Crude has gained this year largely due to fears that a potential US strike on Iran could disrupt supplies, particularly through the Strait of Hormuz, a critical transit route for global oil and LNG shipments. Heightened military deployment in the region and recent Iranian naval drills have also pushed tanker rates to multi-decade highs, reinforcing concerns about supply risks despite broader expectations of a global oil surplus.
Gold eases after strong rally amid trade and geopolitical uncertainty. Gold retreated after four days of gains, falling as much as 1.6% as traders took profit following a sharp rally fuelled by uncertainty over US trade policy and rising tensions in the Middle East. Gold had surged more than 7% as investors sought safe-haven assets after President Trump pledged new tariffs and intensified rhetoric toward Iran, while the US deployed its largest military presence in the region since 2003 ahead of renewed nuclear talks. Market volatility has also been amplified by confusion surrounding Trump’s proposed 15% global import levy and its implications for existing trade agreements, adding to broader risk aversion. Gold remains above USD5,000/oz, with further upside likely as geopolitical risks persist, question about Fed independence intensify, and investor continue reallocating away from sovereign bonds and major currencies.
MIDDLE EAST - CREDIT TRADING
End of day comment – 23 February 2026. Normally, we would assume a 100% state owned entity in Turky to be one that they couldn't IPO at some point in the past, but looking through this roadshow makes me think the government is keeping this equity as a matter of fiscal and national interests rather than because they couldn't IPO it. If the numbers are accurate, we kind of like the credit. It’s a bit all over the place with projects and clearly has a truckload of capex to do for the gas fields, but with ~38% of the debt guaranteed by the government and running leverage of 0.5x before considering that, the metrics are ok. We would caveat that with it looks like they have a fair amount of headroom to raise other debt so that is a consideration.
MIDDLE EAST - MACRO / MARKETS
Israel keeps rates on hold at 4.0% as geopolitical risks weigh on outlook. Bank of Israel (BoI) left its benchmark interest rate unchanged at 4.0%, pausing after two consecutive cuts as policymakers opted for caution amid heightened geopolitical uncertainty surrounding a potential US military strike on Iran. Although inflation has eased to 1.8%, comfortably within the 1-3% target range, and economic growth remains solid, with GDP expanding 4% in the 4Q 2025, the BoI cited rising risk premiums and regional tensions as key reasons for holding rates steady. Officials noted that while inflation continues to moderate and economic activity is expanding above trend, uncertainty linked to Iran tensions, fiscal developments, and potential retaliation risks warranted a wait-and-see approach. The decision divided economists and drew criticism from Finance Minister Bezael Smotrich, who argued that lower borrowing costs are needed to support growth and ease credit conditions. However, with US-Iran negotiations ongoing, a large American military presence in the region, and domestic political uncertainty over Israel’s pending budget, the central bank signalled it would keep further rate decisions data-dependent while prioritising financial and macroeconomic stability.
Fitch downgrades Bahrain to ‘B’ amid rising debt and fiscal pressures. Fitch Ratings has downgraded Bahrain’s rating to ‘B’ from ‘B+’ with a stable outlook, reflecting expectations that government debt, already among the highest of Fitch-rated sovereign, will continue rising despite the rollout of fiscal consolidation measures. Public debt is projected to reach nearly 147% of GDP in 2025 and climb above 150% by 2027, driven by large fiscal deficits estimated at 13.4% of GDP this year due to lower oil revenues, higher interest costs, and increased public spending. While a recently launched reform packages, including higher fuel and utility prices, increased government fees, and a planned corporate income tax in 2027, is expected to gradually narrow deficits, fiscal, and debt metrics will remain weak. The rating is also constrained by low foreign exchange reserves and high interest burdens, though partly offset by strong financial backing from GCC partners, continued access to funding, projected current account surpluses, and steady non-oil growth supported by refinery expansion and gains in financial services.
