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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 steady as tariff developments ease market jitters. Oil prices steadied following four consecutive days of losses, with Brent hovering just under USD69/b and WTI holding above USD65/b, as investors weighed easing tariff tensions and falling US crude inventories against broader macroeconomic uncertainties. President Trump’s announcement of tariffs ranging from 15% to 50%, with a 15% rate set for Japan and further progress expected in talks with the EU-helped alleviate fears of a worst case trade outcome, offering some support to market sentiment. However, the optimism may prove short-lived amid continued concerns over global demand. Meanwhile, expectations of increased output from OPEC+ and ongoing sanctions-related uncertainties, particularly regarding China’s continued imports of Russian and Iranian oil, continue to weigh on the outlook.
Gold slips as trade progress weakens haven demand. Gold continued its decline, trading near USD3,375/oz after a previous 1.3% drop, as signs of progress in US trade talks with key partners reduced investor appetite for safe-haven assets. Reports that the EU may accept a 15% tariff, mirroring a similar deal with Japan that includes a USD550bn investment, lifted Treasury yields, further pressuring gold. However, uncertainty persists, with President Trump still threatening steep tariffs on countries like South Korea and India, while markets await clarity on negotiations with China. Despite recent losses, gold remains up over 25% this year amid global trade tensions and geopolitical conflicts. Traders broadly expect the Fed to hold rates steady next week, though market pricing suggests a rate cut could come as soon as September, which may eventually support gold prices.
MIDDLE EAST - CREDIT TRADING
End of day comment – 23 July 2025. Activity picked up in the afternoon after a quiet morning. Spreads opened 1/2bp tighter on the back of higher UST yield with little directional flows. The afternoon shifted to buying with inflows from ETFs and RMs with some spread selling from dealers. At eod IG is closing -3/4bp on average. In QATAR the squeeze in 35s stood out today with most trades around 102.50 (+0.25pt/-8bp). In ADGB long end was active with 49s and 50s trading closing -0.25pt/-3bp. Oman had another strong day in the long end with 48s most active closing +0.125pt/-6bp. Fins again not active, FABUH numbers were not spread relevant given valuations and the space closes mostly unch in cash/-2bp. Quasis had again MASDAR outperforming with ongoing buying in 35s closing +0.125pt/-6bp, generically -2/3bp in most names. Corps saw continuous interest in DPWDU long end, 35s closing -0.125pt/-3bp. The market is making new tights in spread term with very little profit taking seen. Whilst everyone agrees that valuations look lofty, there is no trigger in sight for turning flows. Macro risk remains constructive too so for now the path of least resistance remains tighter.
MIDDLE EAST - MACRO / MARKETS
GCC project market set for H2 rebound despite Q2 slowdown. The GCC project market is poised for a rebound in the second half of 2025, following a notable slowdown in Q2. The UAE led the region in contract awards with USD14bn in Q2 2025, despite a 47% y/y drop, boosting its market share to nearly half of all GCC awards, thanks to its diversified project pipeline. In contrast, Saudi Arabia saw a 72.5% plunge in awards to USD9.8bn. Overall, the GCC project awards fell 58% to USD28.4bn, the lowest in 14 quarters, reflecting a cyclical cooldown after years of mega-project spending. Despite the slowdown, the UAE remained resilient due to ongoing diversification and investment initiatives, with the gas, industrial, and chemical sectors showing particular strength. The region’s project pipeline remains robust, valued at USD1.73 trillion as of mid-2025, with Saudi Arabia accounting for over half. High-value projects in the pipeline, such as Saudi’s planned USD80bn nuclear plant and USD10bn battery storage system, are expected to support a market revival later this year.
Inflation in Kuwait and Oman remains contained with modest upticks. Kuwait and Oman both reported modest consumer price increases in their latest data releases. In Kuwait, inflation edged up to 3.02% y/y in June from 2.95% in May, driven mainly by higher foods and education costs. Meanwhile, Oman’s inflation remained subdued at 0.9% y/y in June, with minor fluctuations across key categories such as transport and housing. The figures suggest that price pressures remain relatively contained in both economies, allowing for policy flexibility amid shifting regional and global dynamics.
