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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 rebounds as war risks and potential Gulf involvement escalate. Oil prices rebounded, with Brent rising toward USD104/b as concerns grew that the Middle East conflict could widen to include more regional players despite a brief dip triggered by a delay in US strikes on Iran’s energy infrastructure. While President Trump signalled possible talks, Iran denied negotiations and tensions remained high, with ongoing attacks and reports that Gulf allies may join the conflict. The war has already pushed oil up over 40% this month, severely disrupting flows through the Strait of Hormuz and tightening global supply, while refined products like diesel and jet fuel have surged even more sharply. Conflicting US messaging and limited tanker movement through the strait have added to market volatility, leaving investors navigating heightened uncertainty over supply risks, geopolitical escalation, and the outlook for oil prices.
Gold slides as inflation fears and war uncertainty weigh on demand. Gold declined in a volatile session, falling as much as 1.8%, as investors reacted to mixed signals on the Middle East conflict and a temporary delay in US strikes on Iran that failed to restore confidence. Despite brief gains, gold continued its sharp wartime downturn, as rising energy prices fuelled inflation concerns and reduced expectations for monetary easing, prompting investors to shift away from non-yielding assets. Ongoing uncertainty around negotiations, continued disruption in the Strait of Hormuz, and potential escalation involving Gulf allies have kept markets on edge, while historical patterns suggest gold often weakens after initial geopolitical spikes as inflation pressures build. Although prices have dropped significantly since the war began, long-term support factors such as geopolitical tensions and central bank demand remain intact, even as higher energy costs may limit further accumulation.
MIDDLE EAST - CREDIT TRADING
End of day comment – 23 March 2026. The market lifted sovgn issues aggressively, ETFs turned buyers as well, although the ETF flow is more about ETF NAVs than in/outflows. Whilst UST rallied as well spreads remained wider in cash throughout the day. It was different for CDS indices where EM indices are about 10bp tighter. What underperformed materially was the fins and corps where unsold bonds still were for sale into the rally and yet the market was not willing to bid these bonds. That makes the EOD which saw the market coming off the highs producing a very mixed set of spread changes. IG sovgn is about 3bp wider, QATAR underperformed ADGB today and was heavy in the long end (50s -0.75pt/+6bp) but had buyers in the belly (30s -0.125pt/+3bp). Oman is still holding well not being in the literal crossfire, 51s closed -0.375pt/+3bp. Quasis closed 3/10bp wider where MUBAUH outperformed and QPETRO underperformed. Fins looked still 10/15bp wider at EOD in seniors, corps had DPWDU off the lows but also +10bp on the day with front end sellers.
MIDDLE EAST - MACRO / MARKETS
Gulf energy sector adapts amid conflict disruptions and investment push. Amid escalating conflict in the Middle East, Gulf energy producers are navigating operational disruptions while pressing ahead with strategic investments. In the UAE, gas processing at the critical Habshan facility has resumed after a recent attack, helping stabilize domestic supply alongside imports from Qatar, although LNG production at Das Island remains severely constrained due to the closure of the Strait of Hormuz. Across the region, repeated strikes on energy infrastructure have forced output cuts and created significant uncertainty. Despite these challenges, Saudi Arabia and Kuwait are continuing with major energy deals, including plans by Saudi Aramco to sell stakes in export and storage assets and Kuwait Petroleum to lease pipeline infrastructure, signalling efforts to maintain a business-as-usual stance and attract global capital. However, with storage filling up, production being curtailed, and key facilities under threat, the conflict is increasingly straining both operations and investment sentiment, even as Gulf states seek to balance resilience with long-term economic diversification.
Morocco maintains strong growth outlook amid rising external risk. The IMF’s Article IV consultation underscores Morocco’s strong economic resilience with real GDP growth accelerating to 4.9% in 2025, driven by a rebound in agriculture and robust infrastructure investment, alongside low inflation of 0.8% and a lower-than-expected fiscal deficit of 3.5% of GDP supported by solid revenues. Looking ahead, growth is projected to remain strong at around 4.0-4.5% through 2027, underpinned by continued public investment and increasing private sector participation, although near-term momentum is expected to be dampened by the Middle East conflict through higher energy prices, commodity market disruptions, and weaker external demand. Despite these pressures, Morocco’s macroeconomic fundamentals remain strong, supported by prudent policies and access to the IMF’s Flexible Credit Line, though risks remain tilted to the downside amid global uncertainty and potential domestic implementation challenges.
