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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 market optimism offsets peace-talk supply risks. Oil prices were largely unchanged, with Brent near USD63/b and WTI below USD59/b, as a broader risk-on rally in global markets helped balance concerns that progress in Ukraine peace negotiations could eventually release more Russian crude into an already oversupplied market. Asian equities followed Wall Street higher on expectations of further Fed rate cuts, while sentiment was also lifted by the first call between Presidents Trump and Xi Jinping since last month’s tariff truce. On the geopolitical front, Trump signalled optimism after peace talks with Ukraine narrowed gaps on his latest proposal, raising the possibility that sanctions on Russia could be eased if a deal is achieved. Such a move would likely add barrels to a market already grappling with abundant supply. Crude has fallen this year and is heading for a fourth monthly decline, its longest losing streak since 2023, ass OPEC+ and non-OPEC producers ramp up output and inventories sit above the five-year average.
Gold holds firm as traders await key US data for rate-cut signals. Gold steadied near USD4,135/oz after a strong surge in the previous session fuelled by mounting expectations that the Fed rate will cut interest rates in December. Monday’s nearly 2% jump followed remarks from Fed Governor Christopher Waller, who endorsed a rate reduction amid signs of a soft US labour market. Attention now shifts to the release of delayed data, including September retail sales and producer-price figures today and jobless claims tomorrow, likely the final clues before the Fed enters its November 29 communications blackout. Gold has been consolidating since pulling back from its record, but remains up almost 60% this year, underpinned by robust central bank buying and continued ETF inflows.
MIDDLE EAST - CREDIT TRADING
End of day comment – 24 November 2025. Mixed day again, at least with a better tone. Especially in the morning the market saw inflows due to better macro risk and ETF buying. Whilst not sizeable enough to turn the techs of the overall market it lead to dealers starting to bid bonds up. However in the afternoon flows turned mixed again and we saw sellers in the technically weaker bonds where bonds still haven't cleared. Overall the market is still managing to go out 2bp tighter on average. What outperformed today was QATAR sovgn where strong bids in 35s old (+0.375pt/-5bp) and 40s (+0.625pt/-5bp) lent a bid to the curve. What still underperforms are selected quasi sovgn, today the market had sellers in TAQAUH 30s for example closing -0.125pt/+1bp. ADGLXY bonds also remained offered now 10/12bp wider over last week moving 2/3bp wider every day. Fins were quiet, sellers of newer issues didn't showed up and activity was mostly around new FABUH perps which traded well again and closed +0.375pt/-8bp. On the back of it though seen a lot of sellers in old FABUH 4.5 perps moving into the new one. No primary announcements in the universe I trade.
MIDDLE EAST - MACRO / MARKETS
Bank of Israel begins cautious easing cycle. The Bank of Israel (BoI) cut its policy rate by 25bps to 4.25%, citing moderating inflation at 2.5% for two consecutive months, a stronger shekel, and a decline in Israel’s risk premium, though it warned that the economy remains robust with tight labour markets and rising wages. The BoI issued data-dependent guidance, saying future moves will depend on inflation, activity, geopolitical shocks, supply constraints, and fiscal slippage. Growth indicators show a sharp rebound in Q3 2025 and solid momentum into Q4 2025, while inflation is expected to temporarily rise in December before stabilising around the 1-3% target midpoint in early 2026. The BoI is likely to proceed cautiously, roughly 25bps per quarter in 2026, taking the rate to 3.25% by year-end, with the next cut more likely in February than January as policymaker await clearer inflation and GDP signals.
Iraq’s credit fundamentals weaken as fiscal deficit and debt rise. Fitch Ratings affirmed Iraq at ‘B-‘ reflecting a challenging mix of extreme oil dependence, weak governance, elevated political risk, and limited fiscal flexibility, partially mitigated by large foreign-exchange reserves, sizable government deposits, and a relatively favourable debt structure. Governance remains among the weakest globally, and a fragmented parliament after peaceful elections is likely to delay the 2026 budget. Oil still accounts for 40% of GDP and 90% of revenue, with production set to rebound from 3.8mbpd in 2024 to an average 4.3mbpd in 2025-2027 as cuts are phased out and new deals with major oil companies take effect. Despite this, the fiscal deficit is projected to widen to 9.7% of GDP in 2025 due to lower oil prices and higher spending, with large deficits persisting through 2027. Government debt will rise sharply toward 62.5% of GDP, mostly financed by the central bank, though Iraq’s strong FX reserves, covering over 11 months of imports, provide an important buffer. A persistent parallel exchange rate, about 13% weaker than the official rate, reflects US scrutiny of Iraqi dollar transactions and is unlikely to disappear soon.
