Regional energy infrastructure drawn into conflict

The US – Israel air war against Iran has continued with energy infrastructure in GCC economies now becoming directly impacted. QatarEnergy has suspended production of LNG after drones hit part of its complex in Qatar while the Ras Tanura refinery in Saudi Arabia has suspended operations. In the wider Middle East, oil production in Iraqi Kurdistan has also been suspended. After conflicting statements, an IRGC commander told Iranian media that the military will “set fire to any ship” attempting to pass through the Strait of Hormuz, the most explicit threat to the safety of vessels passing through the critical chokepoint.

Limited commercial air travel has resumed in the UAE with carriers prioritising travellers who had been on flights scheduled for the previous few days.

The Turkish economy expanded by 3.4% y/y in Q4 2025, slower than 3.8% recorded a quarter earlier and below market expectations. Construction, information & communications and broader services were among the fastest growing sectors last quarter. For 2025 in aggregate, the economy expanded by 3.6%, on par with where growth has been in 2024.

In the US, the ISM manufacturing index printed better than expected in February at 52.4, ahead of 51.5. However, there was a major increase in the prices paid component, to 70.5 from 59 a month earlier while employment remains below 50, implying a shrinking labour force in the industrial sector.

Today’s Economic Data and Events

08:15 KSA S&P Global Saudi Arabia PMI Feb

09:15 EG S&P Global PMI Feb

11:00 TU CPI y/y Feb: forecast 31.5%

14:00 EC CPI y/y Feb (p): forecast 1.7%

Fixed Income

US Treasury yields priced in an inflationary outcome of the conflict with the 2yr UST yield up 10bps at 3.4752% overnight and the 10yr yield nearly gaining about the same amount to 4.0345%. Global bond markets largely followed suit with yields higher in the UK, France and Germany while local currency EM bonds were overwhelmingly in decline overnight. Yields on 10yr Turkish lira government bonds rose almost 40bps to 28.476% while 10yr Indian government bond yields were little changed.

Regional credit markets were entirely in the red with a 0.6% drop in a GCC-wide USD-denominated index. All geographies recorded losses while CDS spreads all widened.

The Central Bank of the UAE carried out its regular auction of m-bills at the start of the week, raising a total of AED 12.2bn. The bank sold AED 2.896bn of 28-day m-bills at a yield of 3.92%; AED 2.8bn of 84-day m-bills at a yield of 3.94%; AED 3bn of 168-day m-bills at a yield of 3.92%; and AED 3.5bn of 308-day m-bills at a yield of 3.89%. The total issuance was over-subscribed by about 1.5x.

FX

The US dollar received a haven bid overnight, gaining against all peer currencies. EURUSD fell more than 1% to 1.1688 while USDJPY was higher by 0.9% at 157.39. GBPUSD dropped 0.6% to 1.3407 while Swiss franc lost some earlier ground and USDCHF ended the day higher by 1.3% at 0.7792. Commodity currencies were broadly weaker with USDCAD higher by 0.3% at 1.3676.

In emerging markets, USDINR rose by 0.6% to 91.4762 while Turkish lira was flat at 43.958. USDEGP showed its sharped move in months with a 2.7% rise, leaving the EGP weaker at 49.22.

Equities

In the US equity markets showed a lack of direction with the Dow Jones lower by 0.2% but the S&P 500 flat and the NASDAQ slightly higher. European markets were weaker with a 2.5% drop in the EuroStoxx Index and a 1.2% decline in the FTSE 100. Asian markets have opened mixed today with the Nikkei extending losses, down 2.3% while the Hang Seng is near unchanged.

Local markets in the UAE are presently suspended. In Saudi Arabia, the Tadawul managed a gain of 0.1% overnight while in Qatar the equity markets slumped more than 4%. Egyptian equities closed flat while Turkish stocks dropped more than 2%.

Commodities

Oil jumped higher at the start of the week in response to the conflict and the news that the Strait of Hormuz is effectively closed to all shipping. Brent futures added 7.3% by the close, unwinding some of the initial surge on the open, to settle at USD 77.74/b but have added another 2% in early trade today. WTI was up by 6.3% at USD 71.23/b and has pushed above UDS 72/b in early trade.

The standout moves were in European gas with a near 50% rise as they respond to Qatar suspending production of LNG. European gas closed at EUR 44.51/MWh, having spent much of the rest of the month around EUR 30.

Gold prices crawled higher with not as large of a haven move as to be expected. Prices closed at USD 5,322/oz, up 0.8%.