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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 edges higher as US-Iran talks approach amid military build-up. Oil prices rose, with Brent climbing above USD71/b and WTI near USD66/b, as markets assessed the prospects of renewed US-Iran nuclear negotiations against the backdrop of a significant American military build-up in the Middle East. While President Trump reiterated his preference for diplomacy, he warned that failure to reach a deal would have serious consequences, keeping geopolitical risk premiums elevated. The US deployed its largest regional force since 2023, including aircraft carriers and advanced fighter jets, fuelling speculation about potential conflict. Traders remain focused on the risk that escalating tensions could disrupt shipping through the Strait of Hormuz, a vital artery for global oil and LNG flows, even as broader expectations of rising global supply continue to temper gains. Talks between US and Iranian officials are scheduled to resume in Geneva tomorrow.
Gold gains on trade uncertainty and Middle East tensions. Gold rose as much as 1%, recovering from the previous session’s decline, as uncertainty over US trade policy and escalating geopolitical risks in the Middle East supported safe-haven demand. Gold has stabilised above USD5,000/oz, regaining more than half of the losses from its sharp correction earlier this month. Investors caution has been fuelled by the implementation of a new 10% US import tariff, potential additional levies, and concerns over rising sovereign debt, which have reinforced demand for hard assets. However, expectations that US interest rates may remain elevated for longer, following stronger labour market data and cautious signals from Fed officials, could limit further upside for non-yielding gold.
MIDDLE EAST - CREDIT TRADING
End of day comment – 24 February 2026. A mixed day with odd moves across names and maturity buckets. We first had the news that UAE will be removed from the EMBI starting March 31st with four months phase out period. Whilst we did see some dedicated RM outflows on this, the flow was small given the underweight of the region in dedicated EM portfolios as well as dedicated RM flows not being the main price driver in GCC. To an extent this was to be expected given the QATAR/ Kuwait exclusion last year. What we did see however today was general selling of long end bonds in UAE names which coupled with the flattening of the UST curve led to a steepening of credit curves. Take ADGB 54s closing -0.25pt/+3bp vs ADGB up to 2031s closing unch/-2bp. Any quasi-sovereign UAE curve would show the same pattern (MUBAUH, ADNOCM, ADQABU). What closed wider across the curve today was SHJGOV, and clearly here the exclusion from the index might have a more lasting impact given the weaker regional/ off benchmark sponsorship. Closing this curve -0.25pt/-0.5pt and +5/7bp.
MIDDLE EAST - MACRO / MARKETS
JPMorgan to remove UAE from EM bond indexes. JPMorgan will remove the UAE from its emerging market bond indexes by June after the country surpasses the bank’s income and wealth thresholds for three consecutive years, signalling its transition toward developed-market status. The UAE, which accounts for 4.1% of JPMorgan’s flagship EM bond index an 1% of its euro-denominated index, will be phased out in four equal steps starting March 31. The decision follows similar removals of Kuwait and Qatar and may initially reduce passive inflows while modestly widening spreads in the broader EM bonds universe. However, the UAE’s strong credit ratings, among the highest in the EM space, and solid bond performance this year suggest that demand from developed market, crossover, and regional investors could offset potential outflows. The reclassification reflects the country’s high per capital income and development market living standards, reinforcing its improving economic profile even as its bonds and equities continue to attract global investor interest.
Saudi fiscal deficit hits five-year high amid oil revenue pressure. Saudi Arabia’s budget deficit widened sharply in the Q4 2025, reaching its highest level in five years as softer oil prices continued to strain public finances. The government posted a quarterly shortfall of USD25.3bn, bringing the total deficit for the year to nearly USD73.6bn, more than double 2024’s level and equivalent to about 5.5% of GDP. Although non-oil revenues increased in the final quarter, oil income declined y/y, highlighting the kingdom’s ongoing exposure to crude price volatility. With oil prices well below the estimated fiscal breakeven level, Saudi Arabia has ramped up borrowing in international debt markets and diversified its funding sources, while also reassessing the pace and scale of major vision 2030 projects to prioritize efficiency and private sector participation. While officials expect the deficit narrow to 3.3% of GDP this year, investors anticipate it will remain higher, reflecting persistent spending pressures and a challenging oil revenue environment.
