UAE economy grows by 4% in 2024

The UAE’s economy grew by 4% in 2024 according to estimates released by the Federal Competitiveness and Statistics Centre. The non-oil economy expanded by 5% while the oil sector grew by close to 1%. At a sector breakdown, many of the sector’s that have been supporting growth in recent years continued to perform well in 2024. Transport and storage was the fastest growing sector last with growth of 9.6% while construction grew by 8.4%. Financial services and hospitality were also among the fastest growing sectors with expansion of 7% and almost 6% respectively.

Inflation in Saudi Arabia eased modestly in May to 2.2% year/year, down from 2.3% for the previous two months. As has been the case for multiple months, housing is the primary contributor to inflation in the kingdom’s economy with the housing and utilities component of inflation increasing by 6.8%. Hospitality and food prices were also higher last month along with personal goods. Most other categories in the Saudi inflation basket though remain in outright deflation. So far in 2025, inflation has recorded an average of about 2.2%.

The escalation of the conflict between Iran and Israel pushed markets to haven assets at the end of last as the economic fallout of the exchange of fire is uncertain. Energy markets are enormously in focus with a perceived threat to production and shipping of hydrocarbons from the Gulf and through the Strait of Hormuz. Equity markets closed weaker while bonds sold off as the passthrough from higher energy prices to inflation may limit central banks’ ability to cut rates.

Consumer sentiment in the US improved markedly in June according to a preliminary estimate from the University of Michigan. The sentiment index rose to 60.5 for the month, up from 52.2 a month earlier and ahead of market expectations. There was also a major cooling of inflation expectations, dropping to 5.1% for year-ahead inflation from 6.6% a month earlier while longer-run inflation expectations remain steady at slightly more than 4%.

Today’s Economic Data and Events

11:00 TU current account balance Apr: forecast – USD 7.5bn

11:00 TU inflation expectations year-ahead June

India trade data

Fixed Income

US Treasuries faded an initial haven rally response to the Israeli attacks on Iran as markets focused on the inflationary passthrough of higher energy costs. Yields on the 2yr UST ended the day higher by 4bps at 3.9475% while the 10yr yield added about the same amount to close at 4.3987%. Markets have firmed up their pricing for two 25bps rate cuts this year with this week’s FOMC at just a 3% probability of a move.

Bond markets virtually everywhere closed lower at the end of last week as investors looked for any haven bids. An index of GCC bonds fell 0.3% on Friday with losses across all geographies. UAE bonds dipped by 0.2% while Saudi bonds were lower by 0.4%. By sector sovereigns fell 0.4% on Friday while sukuk prices fell 0.2%.

FX

The US dollar received a haven boost at the end of last week, spurred on by the conflict between Israel and Iran. The dollar was higher against virtually all peers with even other traditional haven currencies like Swiss Franc and Japanese Yen unwinding initial gains. USDCHF edged up by 0.2% on the day to 0.8114 while USDJPY rose by 0.4% to 144.07. EURUSD was lower by 0.3% to 1.1549 while GBPUSD dropped 0.3% to 1.3571.

High beta currencies like AUD and NZD fared worse with a drop of 0.7% and 0.9% respectively while the run higher in oil prices helped CAD to strengthen marginally on the day. In emerging markets USDINR rose by almost 0.6% to an 86 handle for the first time since May 22 while USDTRY added less than 0.2% to 39.4185.

Equities

Benchmark equity markets sold off as investors shed risk. The Dow Jones fell 1.8% while both the S&P 500 and NASDAQ recorded slightly wider than 1% losses. The EuroStoxx 50 fell by 1.3% while the FTSE 100 was off by 0.4%.

In the UAE the DFM fell by 1.9% on Friday while the ADX was lower by 1.7%.

Commodities

Oil markets were the most evident expression of market anxiety over the fallout of the conflict between Israel and Iran. Brent futures spiked on the open to USD 78.50/b, up more than 13% before paring some of those gains to end the day up 7%. In WTI markets the moves were similar with a 14.1% jump to USD 77.62/b before closing up 7.3% at USD 72.98/b. Energy infrastructure has come under direct attack in this conflict with Iran suspending output at the South Pars field after a missile attack started a fire at the site.

Industrial metals were broadly weaker on the day with copper, aluminium and iron ore all softer while gold prices rallied 1.4% to USD 3,432/troy oz.