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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 slumps amid supply glut fears and shifting Ukraine diplomacy Oil is on track for its fourth straight monthly decline, the longest slide since 2023, with Brent steady above USD63/b and WTI near USD59/b as traders focus on this weekend’s OPEC+ meeting and potential progress toward ending the Ukraine war. OPEC+ is expected to maintain its pause on output increases for early 2026, while long-term capacity reviews take centre stage. Prices have fallen 15% this year on expectations of a widening surplus driven by renewed OPEC+ capacity and rising non-OPEC supply, with the IEA projecting supply to rise by 2.5mb/d creating a market surplus of roughly 4mb/d given weak demand growth. Diplomatic signals from Russia and the US raise the prospect of easing sanctions, which could unleash additional Russian barrels, even as current curbs strain producers, evident in crude stockpiles at Russian fields climbing above 16 million barrels, one of the highest levels since the war began.
Gold extends rally on rising Fed cut expectations. Gold is heading for its fourth consecutive monthly gain, trading around USD4,190/oz and up nearly 5% on the week, as expectations intensify for another US interest rate cut in December, with markets pricing 25bps move. A wave of dovish signals from Fed officials and delays in key US economic data, caused by a record government shutdown, have strengthened the case for lower borrowing costs, which boost non-yielding assets like gold. Gold has risen almost every month this year and is on track for its best annual performance since 1979, supported by strong central bank purchases and robust inflows into ETFs, even after pulling back from its record above USD4,380/oz. Going forward, investors will focus on the Fed’s December decision, the pace of US data normalisation, and whether sustained safe-haven flows can keep gold anchored above the USD4,000 level.
MIDDLE EAST - MACRO / MARKETS
Egypt posts strongest growth in over two years. Egypt’s economy expanded by 5.3% in the first quarter of FY2025-26, its fastest pace in more than two years and the first time growth has topped 5% in over three years, driven by structural reforms that are shifting activity toward tradable, high-productivity sectors such as manufacturing, tourism, and telecommunications. Private investment surged 25.9%, reaching 66% of total investment as the government continued reducing its share to prioritise high-impact projects and empower the private sector. Strong non-oil manufacturing growth was propelled by robust demand, tourism jumped 13.8% while Suez Canal revenue returned to positive growth (8.6%) after 18 months of declines, and the ICT and financial sectors expanded by 14.5% and 10.2%, respectively. Although the extractive sector contracted due to weaker petroleum and gas output, the pace of decline eased amid 75 new discoveries and 383 new wells, boosting production capacity. The Planning Ministry said momentum remains strong, projecting at least 5% growth for the full fiscal year, with a more stable regional backdrop offering further upside.
Gulf states expand influence in Africa through strategic investments. Gulf sovereign wealth funds are rapidly deepening their presence in Africa as part of a broader strategy to extend influence beyond oil and secure critical resources for the global clean energy transition, exemplified by Qatar Investment Authority’s USD500 million investment in Ivanhoe Mines to access copper and other key minerals. Qatar, Saudi Arabia, and the UAE are channelling capital into African renewable energy, mineral extraction, and infrastructure projects to diversify their economies, ensure long-term energy security, and position themselves within global supply chains in increasingly shaped by AI-driven electricity demand. Africa’s vast solar potential and rich reserves of minerals make it a natural partner for Gulf economies, which have abundant capital but rely heavily on hydrocarbons. As the world moves toward a post-oil era, this growing “south-south” partnership positions the Gulf as a rising power shaping Africa’s energy future and potentially redefined global economic influence.
Moody’s affirms Qatar’s Aa2 rating on strong financial buffers, LNG expansion, and balanced risk. Moody’s affirmed Qatar’s Aa2 sovereign rating and stable outlook, citing the government’s exceptionally strong balance sheet, anchored by an estimated USD400bn in financial assets, or 184% of GDP, which provides a powerful buffer against shocks and far outweighs its moderate debt load. The agency expects Qatar’s fiscal strength to remain robust despite softer oil prices, as the country’s massive LNG expansion, boosting capacity by more than 80% between 2026 and 2031, will offset lower oil revenues, strengthen exports, and support a return to fiscal surpluses from 2027 onward. While Moody’s highlights persistent credit challenges linked to Qatar’s heavy economic dependence on hydrocarbons, exposure to regional geopolitical risks, and ongoing limitations in institutional transparency, it emphasises that large sovereign wealth assets and effective policymaking significantly mitigate these vulnerabilities. The stable outlook reflects a balance of risks at the Aa2 level. Accelerated diversification and improved transparency could support an upgrade, while a sustained decline in global hydrocarbon demand, fiscal slippage, or any disruption to Strait of Hormuz shipping routes could exert downward pressure.
