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 surges above USD 107/b as Houthi fighting threatens Red Sea supply. Oil held above USD 107/b, after Brent headed for its strongest weekly gain since July, while WTI traded near USD 102/b. Prices jumped as Houthi forces advanced toward coastal areas near the strategic Bab al-Mandeb Strait, including a push toward Mokha, raising fears of deeper disruption to Red Sea shipping. The escalation compounds existing pressure on Gulf supplies, with Houthi attacks earlier in the week forcing some Saudi energy facilities to halt operations while US-Iran fighting continues to threaten tanker traffic through Hormuz. Meanwhile, Saudi production has already fallen sharply amid constraints on both its Gulf and Red Sea export routes, while stronger Chinese crude buying is adding to market tightness. With both Hormuz and Bab al-Mandeb facing intensifying security risks and little prospect of a near-term US-Iran truce, disruption to Saudi and wider Gulf exports could keep crude and refined-product prices elevated.

Gold holds for third weekly loss as rate-hike bets rise. Gold traded near USD 4,315/oz, heading for a third consecutive weekly decline. US producer prices rose 0.4% m/m in August, the strongest increase since May, reinforcing concerns that surging energy costs are feeding back into inflation as Middle East hostilities intensify. Higher oil prices and Treasury yields added further pressure on gold after the US government’s expanded debt-buyback operation failed to materially contain long-term borrowing costs. Markets are now pricing around a 70% probability of a Fed rate hike at the next FOMC on September 16. Attention turns to today’s US CPI release for further evidence on underlying inflation pressures. Although prolonged Middle East tensions provide some safe-haven support, persistent energy-driven inflation and rising bond yields could keep gold under pressure.

MIDDLE EAST - CREDIT TRADING

End of day comment – 10 September 2026. Price action is rather ugly and overall, it just feels the repricing of spreads is not done yet. This is apparent especially where new issues are pricing. Financials is a good example where today all of sudden some 'older', less liquid AT1s got sold. ALLQ will make you believe it’s in the low 6% but then you just had MASQUH new 5y trading at 5.75%. Talking of new issues, most traded at/above reoffer in the morning but prices came off fast with the rates move post PPI/ ECB. Both DPWDU tranches were -2bp in spread terms but about 0.25pt lower than reoffer. New MASQUH 31s closed around 99.25, also about 0.25pt lower from reoffer. Talking of repricing MOROC EUR curve woke up to the reality of the EUR moves. 38s closed -1pt/+5bp. Tomorrows CPI will be crucial, but it feels with oil crossing over 105 and ECB October hike in play, the reality of higher rates for longer sinks in. (Source: Domonik Roth, Credit Trader)

MIDDLE EAST - MACRO / MARKETS

Turkey holds rates at 37% as energy risks temper easing. The Central Bank of Turkey (CBRT) kept its policy rate unchanged at 37%, balancing improving domestic inflation dynamics against renewed external price pressures from the Middle East conflict. Annual inflation eased more than expected to 31.5% y/y in August, while underlying inflation continued to decelerate and weak domestic demand has limited the pass-through of supply shocks. However, Brent’s rise above USD 100/b has increased inflation risks for Turkey given its heavy dependence on imported energy, prompting the CBRT to pause after easing monetary conditions by an effective 300bp in late August. The bank reiterated that future decisions would remain data-dependent and that it is prepared to tighten again if the inflation outlook deteriorates materially. We expect cautious easing to resume as disinflation and weaker demand become more established, with two 100bp cuts taking the policy rate to 35% by year-end, although persistently high energy prices or tighter global monetary conditions could delay and reduce the scale of easing.

Saudi oil output falls to lowest since 1990 as export route tighten. Saudi Arabia reported that crude production plunged 1.9mb/d in August to 6.24mb/d, the lowest level since 1990 and below the previous wartime low reached in April, as renewed US-Iran hostilities constrained the kingdom’s export routes. The decline is consistent with tanker-tracking data showing Saudi crude exports fell by around a third to roughly 3mb/d during the month. KSA reported crude supply to the market of 7.12mb/d, above actual production, suggesting inventories were drawn down to support deliveries. However, OPEC secondary-source estimates showed a much smaller production decline to 7.28mb/d, highlighting considerable uncertainty around wartime output data. The disruption comes as Brent has moved above USD 100/b and OPEC faces growing internal strains following the UAE’s departure, potential Venezuelan exit and Iraq’s push for higher quotas. Persistent constraints on Saudi export capacity could tighten physical crude supply further, increase reliance on inventories and sustain upward pressure on oil prices despite OPEC+’s nominal production capacity.