EDWARD BELL
Head of Research
DIFC Branch – Dubai
T: +971 (4)387 5033
E: edward.bell@ae.mufg.jp

SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T: +971 (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 falls as diplomatic hopes ease Middle East risk premium. Oil prices are selling off as markets look to the prospect of a diplomatic resolution to the US – Israel – Iran conflict. Brent futures for January 2027 are lower by 3% in early trade today, holding around USD 110/b while WTI is off by slightly more and trading at USD 100/b. Press reports are indicating that US President Donald Trump has pushed Israel to give diplomacy more time to come to a conclusion though the geopolitical backdrop in the region remains elevated. Several vessels were attacked in the Strait of Hormuz and in the Gulf over the last several days, keeping the geopolitical threat prominent. At the same time the OPEC+ members who had been providing voluntary production restraint agreed to keep targets unchanged for December. Production and exports are still being impacted by constraints on the Strait of Hormuz, meaning the target levels are largely nominal: Saudi Arabia’s target level of 10.4m b/d for December for example compares with production of closer to 7m b/d in September.

Gold holds below USD 4,000 as geopolitical risks return to focus. Gold prices continue to hold below USD 4,000/troy oz with an eye likely moving from the outcome of the Fed’s decision last week back to geopolitical risks from the region that could impact energy inflation. Investors added to gold holdings in October though the overall increase was modest. Across the rest of the precious metals complex, prices are modestly higher in early November trade.

MIDDLE EAST - CREDIT TRADING

End of day comment – 30 October 2026. Weak day in line with macro. Overnight UST rallied as tech continued its sell off. There were also reports of Trump being briefed on military strike options. That made for a weak start in spread terms with GCC bond prices hardly following UST up. Flows were also skewed towards selling today as macro markets were risk off and ahead of the weekend. International RM and ETFs were on the sell side. That said month end flows were light, and the market still had some stronger bids in duration bonds. The KSA complex closed 3/5bp wider but was still the outperformer this week with the long end about -10bp for the week. QATAR/ ADGB going out +2/3bp with little activity. In quasi sovereign both new TAQAUH tranches were active with 32s closing +0.25pt/+3bp and 36s +0.125pt/+5bp. Financial bonds still seeing nothing but sellers mainly in T2 and AT1. FABUH 36s T2 traded closing unch/+8bp. (Source: Dominik Roth, Credit Trader)

MIDDLE EAST - MACRO / MARKETS

S&P affirms Qatar at AA and Fitch maintains Abu Dhabi at AA. S&P Global Ratings affirmed Qatar’s sovereign rating at AA with a Stable Outlook, despite forecasting a 14% GDP contraction and a fiscal deficit of 6% of GDP in 2026, reflecting severe disruptions to LNG production and exports. Qatar’s substantial liquid government assets, estimated at 200% of GDP, underpin its creditworthiness, while the North Field expansion is expected to support a strong recovery, with GDP growth projected at 15% in 2027 and fiscal surpluses returning from next year. Meanwhile, Fitch Ratings affirmed Abu Dhabi’s AA rating with a Stable Outlook, supported by exceptionally strong fiscal and external buffers, including sovereign net foreign assets estimated at 300% of GDP and government debt of just 19.3% of GDP at end-2025. Abu Dhabi’s economy is forecast to expand 3.7% in 2026 and 15.1% in 2027, supported by recovering oil production and alternative export routes, while its 2026 budget surplus is projected at 2.3% of GDP, excluding investment income. Both ratings highlight the importance of substantial sovereign asset buffers in mitigating regional conflict risks, although prolonged energy export disruptions and renewed infrastructure attacks remain key downside risks to their economic recovery and fiscal outlooks.

KSA GDP contraction eases to 3.8% in Q3 as oil and non-oil activity recover. Saudi Arabia’s real GDP contracted 3.8% y/y in Q3 2026, improving from a 4.7% decline in Q2. The improvement was primarily driven by a smaller contraction in oil activities, which declined 20.4% y/y compared with 24.8% in Q2, subtracting 4.7ppt from headline growth. Meanwhile, non-oil activity accelerated to 1.9% y/y from 0.8%, signalling improving resilience despite ongoing regional conflict, while government activity contracted 2.7%. On a seasonally adjusted basis, GDP rebounded 1.3% q/q, reversing an 8.4% decline in Q2, supported by a 5.7% increase in oil activity and 0.6% growth in non-oil sectors. The Q3 recovery suggests Saudi Arabia is gradually emerging from the conflict-driven downturn, although sustained oil export normalisation and stronger non-oil momentum will be critical to supporting growth, while planned utility tariff increases in 2027 pose additional inflationary risks.