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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 diplomacy stalls and Hormuz disruptions deepen ties. Oil prices climbed, with Brent nearing USD104/b and WTI around USD92/b, as conflicting signals from the US and Iran on potential peace talks heightened uncertainty around the ongoing conflict that has effectively shut down the Strait of Hormuz. While the US continues to push for negotiations, Iran has rejected proposals and is considering imposing transit fees on vessels, reinforcing its control over the critical waterway. The near-total disruption of Hormuz has curtailed millions of barrels of daily supply and driven oil toward its biggest monthly gain since 1990, fuelling global inflation concerns and hitting Asian economies particularly hard. Ongoing military escalation, including troops deployments and fresh strikes, alongside limited tanker movement under strict Iranian conditions, continues to strain global energy markets. Governments worldwide are bracing for worsening impacts, from rising fuel prices to supply shortages.
Gold stabilises as war uncertainty and rate outlook weigh on sentiment. Gold steadied near USD4,520/oz as investors assessed mixed signals from the US and Iran regarding potential negotiations to end the Middle East conflict. While the US continues to promote diplomatic efforts, Iran has rejected proposals and ongoing troop deployments have heightened fears of further escalation. Despite the recent recovery, gold remains down approximately 15% since the war began, pressured by rising energy-driven inflation expectations that have reduced the likelihood of rate cuts and increased the prospect of tighter monetary policy. At the same time, concerns about a potential US economic slowdown and recession may limit further rate hikes, creating a more balanced outlook. Continued ETF outflows also weigh on sentiment, leaving gold caught between geopolitical uncertainty and shifting macroeconomic expectation.
MIDDLE EAST - CREDIT TRADING
End of day comment – 25 March 2026. The market moving news came overnight, first the troop deployment into London close taken -ve, but then into NYC close the peace plan taken +ve. The morning saw buying flows from the get-go pushing sovgn bonds up to 10bp tighter at some stage. We peaked around the Iranian counteroffer from where the market became more two ways. Activity picked up with more international client participation. Selling flows dominated the last 2 hours, sovgn and quasi sovgn are getting well absorbed. It is a bit different though for financials. At eod IG is 4/6bp tighter, ADGB outperformed QATAR with ADGB 54 going out +1.25pt/-6bp vs QATAR 50s +0.875pt/-4bp. Higher beta sovgn were quieter, we closed OMAN/SHJGOV -5bp. MOROC got active today though with a lot of buyer in short end 27s/28s/29s (+0.375pt/-15bp) and long end 50s (+1.25pt/-10bp). Quasi sovgn had QPETRO bouncing after recent weakness, closing 41s and 51s +1pt/-8bp. MUBAUH feels strongest in the AD complex, closing that curve about -5bp.
MIDDLE EAST - MACRO / MARKETS
Bahrain inflation eases further in February. Bahrain’s latest CPI data shows that inflation slowed to around 0.5% y/y in February from 1.3% y/y in January, indicating a renewed easing in price pressures. The decline suggests that earlier increases in service-related costs, such as transport and hospitality, have moderated, while softer prices in categories like food and clothing continue to weigh on overall inflation. Despite some month-to-month volatility, inflation remains well contained and among the lowest in the region, supported by Bahrain’s currency peg and stable monetary framework, which help anchor price expectations. Looking ahead, inflation is likely to remain subdued, with only a gradual pickup likely as domestic demand strengthens, but overall price pressures should stay contained in the near term.
Iran moves to formalise Hormuz transit tolls. Iran is reportedly drafting legislation to introduce transit tolls for vessels passing through the Strait of Hormuz, a move that would formalise its control over one of the world’s most critical maritime chokepoints and create a new source of state revenue. The proposal, backed by Iranian lawmakers, seeks to legally recognise Iran’s authority over the strait and impose fees on countries using the route for trade, energy, and food shipments. This initiative follows severe disruptions to shipping flow, with transit volumes sharply reduced and only limited vessels currently passing, highlighting Iran’s growing leverage over global trade routes. In parallel, Iran has also floated mechanisms such as “safe corridors” or regulated passage in exchange for payment or coordination, signalling a broader shift toward monetising access rather than fully blocking the strait. Economically, the proposed toll system could significantly increase shipping costs, insurance premiums, and transit fees, effectively acting as a tax on global trade and adding upward pressure on inflation through higher transportation costs. Looking ahead, if implemented, the policy could reshape regional trade dynamics by institutionalising transit risk premiums and increasing volatility in shipping and logistics costs, with broad implications for global supply chains and MENAT economies.
