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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 remains high as Iran tensions and dollar weakness support prices. Oil prices remained near their highest levels in four months as markets balanced rising geopolitical risks against expectations of ample global supply. Brent traded close to USD68/b after a sharp rally, while WTI held above USD62/b, supported by renewed US pressure on Iran following the regime’s violent crackdown on protests. At the same time, a steep decline in the US dollar, which has fallen to its weakest level in nearly four years amid policy uncertainty and Trump’s stated tolerance for weaker currency, has boosted the appeal of dollar-dominated commodities. Despite forecasts of a supply glut this year as OPEC+ and other producers increase output, oil has started the year on a strong footing, with widening backwardation in prompt spreads for both Brent and WTI pointing to tighter near-term physical market conditions.
Gold surges past USD5,200 on weak dollar and safe-haven flight. Gold climbed to a record high above USD5,200/oz, extending a rapid rally driven by dollar weakness and strong demand for safe-haven assets as investors flee sovereign bonds and currencies. Gold rose again after a sharp gain in the previous session, with the US currency sliding to multi-year lows amid speculation about currency support efforts and broader market uncertainty, making precious metals cheaper for global buyers. The rally reflects heightened geopolitical and economic risk, including shifts in US policy and market stress in major bond markets, which has fuelled a debasement trade as investors seek refuge from volatile traditional assets. Silver also advanced sharply, reflecting spill-over demand across the precious metals complex as markets navigate persistent uncertainty.
MIDDLE EAST - CREDIT TRADING
End of day comment – 27 January 2026. Another quiet, mixed day. Cash prices remain somewhat immune to intraday UST moves, albeit with some notable exception today. On balance the market was broadly +1bp. An underperformer today was OMAN long end. As if it needed a reminder how tight OMAN is trading, there always seems to be weakness in the long end around new Saudi issuance. As Aramco priced its long bond at 6.106% yield and OMAN long end trading around 6% yield, there was some selling mainly in 48s and 51s closing -0.375pt/+2bp. Then there was some weakness in corps today. Aldar still has a bit an overhang of hybrids and 56s today closed -0.25pt/+4bp. furthermore the market saw sellers in DPWDU from 2035s onwards with 49s last -0.5pt/+3bp. Away from this it was biz as usual though, the primary market activity and subsequent trading in new issues take a lot of attention away from my sovereign and quasi sovereign bonds. Today was another day with no new issue announcement in my space, FED and tech earnings next.
MIDDLE EAST - MACRO / MARKETS
IMF urges fiscal consolidation as Bahrain’s debt rises despite steady growth. The IMF concluded its 2025 Article IV consultation with Bahrain, noting that while economic growth remained steady, rising fiscal vulnerabilities pose significant risks. Real GDP growth slowed to 2.6% in 2024 amid weaker oil output but was supported by a resilient non-hydrocarbon sector, led by financial services, while inflation stayed low at 0.9%. However, fiscal pressures intensified, with the budget deficit widening to 11% of GDP and public debt climbing to 134% of GDP, alongside still-low foreign exchange reserves despite recent improvements. Looking ahead, growth is expected to pick up to 2.9% in 2025 and 3.3% in 2026 as oil production recovers, refinery expansion comes fully online, and non-oil sectors such as tourism, logistics and the digital economy continue to expand. The IMF welcomed Bahrain’s diversification progress and recently announced fiscal measures, including corporate income tax and subsidy reforms, but stressed that sustained and credible medium-term fiscal consolidation, stronger revenue mobilisation, reduced subsidies, and enhanced fiscal transparency are essential to place debt on a downward path and safeguard macroeconomic and financial stability.
World Bank approves USD350 million package to support Lebanon. The World Bank has approved USD350 million in financing for Lebanon to help meet the basic needs of poor and vulnerable populations and accelerate public sector digitalisation amid a fragile economic recovery. The package includes USD200 million for a Social Safety Net Enhancement and System Building Project to strengthen social protection systems and complement government-funded cash transfers, and USD150 million for a Digital Acceleration Project aimed at improving citizens’ access to essential government services and economic opportunities through digital reforms. The World Bank said the funding is intended to support recovery, job creation and service delivery, as Lebanon’s prolonged crisis have deepened poverty, food insecurity, and limited access to healthcare.
