Daily Economic Update

Oil: Brent falls back below $100/bbl as Trump talks of conflict ending soon and G7 explores oil reserve release. A ‘wild’ Monday in the oil markets saw Brent futures surging as much as 28% d/d to almost $120/bbl in intraday trading before falling precipitously back below the $100 level to $98.9/bbl (+6.8% d/d) by the close of play. This was the largest intraday reversal (peak to close) on record. Brent’s drop was precipitated by news that the G-7 countries were looking to coordinate the release of 300–400 mb of oil from their strategic reserves to partly mitigate losses from the blocked Strait of Hormuz. If it materialises, this could be potentially the largest intervention in the oil market ever at 25-30% of global strategic stocks and double the volume released after Russia’s invasion of Ukraine in 2022. Then, later in the day at a press conference, President Trump waded in with his remarks that the war against Iran was "nearing completion" and that he was looking to “keep the oil prices down”. He also said that he would ease some oil-related sanctions on Russia and prepare for the US Navy to escort oil tankers through the Strait of Hormuz. Meanwhile, Saudi Arabia was reported yesterday to have followed other regional oil producers in cutting production. The Kingdom is, however, accelerating the rerouting of oil flows to the Red Sea port of Yanbu. Brent opened lower in Asian markets this morning and was last seen trading at around $94/bbl.  
 
UAE: S&P confirms Abu Dhabi “AA/A-1+” rating with a stable outlook. S&P Global Ratings affirmed Abu Dhabi’s ‘AA/A 1+’ sovereign foreign and local currency credit ratings with a stable outlook. The rating underscores Abu Dhabi’s strong fiscal and economic position and will be seen as a vote of confidence in the emirate’s ability to navigate external shocks and maintain stability in an increasingly volatile regional environment. The assessment highlights Abu Dhabi’s substantial net asset position, estimated at 358% of GDP in 2026, which provides a sizable buffer against disruptions to oil production, trade routes, and investor sentiment. While the current US-Iran conflict has spilled over into neighboring states through Iranian strikes on UAE infrastructure and is expected to weigh on the country’s economic growth and external performance, S&P notes that the damage has so far remained limited. S&P now projects GDP growth to moderate to an average of 2.2% over 2026-29 mainly due to the still-evolving geopolitical strife, which will certainly reflect in softer tourism, real estate activity, and expatriate flows. Fiscal surpluses are expected to persist, averaging around 3.8% of GDP, supported by prudent expenditure management and ADNOC related revenues (assuming a Brent oil price of $65/bbl from 2026-2029). The stable outlook reflects confidence that Abu Dhabi’s sizeable sovereign wealth assets and conservative fiscal stance will help cushion against hydrocarbon volatility and geopolitical uncertainty. Downside risks stem primarily from a severe and prolonged disruption to oil exports. A speedy resolution to the conflict and easing in regional tensions is the central upside risk.

Egypt: Government raises fuel prices amid regional energy pressures. The Ministry of Petroleum announced an overnight increase in fuel prices, raising them by an average of around 16%, citing “exceptional circumstances resulting from the geopolitical developments in the Middle East and their direct impact on global energy markets”. The new prices came into effect at 3 am. Under the new pricing structure, 95-octane gasoline rose to EGP 24/liter, up from EGP 21 (+14.3%), while 92-octane gasoline increased to EGP 22.25/liter, up from EGP 19.25 (+15.6%). More importantly, diesel prices climbed to EGP 20.50/liter, up from EGP 17.50 (+17.1%). The increase in diesel is particularly significant, given its widespread use in commercial transportation and logistics. As a result, the adjustment is likely to pass through relatively quickly into the prices of goods and services across the economy. From a macroeconomic perspective, the move could add around 3–5% pts to inflation over the coming months. This may complicate the Central Bank of Egypt’s current monetary easing cycle, potentially leading policymakers to pause further rate cuts or even consider a temporary tightening should inflationary pressures exceed expectations.

US: Consumer inflation expectations largely steady amid a mixed employment outlook; S&P 500 recovers from a steep intraday loss. According to the monthly New York Fed survey, consumers’ next year inflation expectations ticked down to an eight-month low of 3% in February from 3.1% in January but remained steady at 3% for both the three-year and five-year periods ahead. Consumers’ views on employment prospects were mixed, with falling income growth expectations and lower chances of finding a new job if made redundant but a reduced probability of losing the current job and a lower unemployment rate. The outlook on household finances was slightly better, with a sharply lower probability of missing minimum debt payment over the next three months and a marginal improvement in views about overall household finances. We note that since the survey was conducted prior to the latest surge in gasoline prices, March’s outcome may show higher near-term inflation expectations (if energy prices remained elevated). Meanwhile, following some comments by President Trump that the markets interpreted as indicating a likely end to the Middle East military conflict soon, the S&P 500 recovered to close 0.8% higher yesterday, recouping an intraday loss of around 1.5%, while yields on UST 10Y also gave up their prior spikes. Similar moves were also witnessed in the UK, Germany, and France government bond markets, as 10Y yields retreated sharply from their intraday highs on Monday.

China: Exports surge in January-February, significantly beating expectations. Exports surged 22% y/y in January-February, easily exceeding expectations (7.1%) and outperforming December’s rise (6.6%). Imports also jumped 20% y/y in the first two months of the year, easily beating expectations (6.3%) and December’s increase (5.7%). China merges trade data from January and February to mitigate distortions caused by the changing Lunar New Year holiday. The recently released data underscored China’s position as an export powerhouse as even the higher US tariffs levied in 2025 had minimal effect on the country’s exports, with exporters shifting supply to other countries to mitigate the loss of US demand. In terms of trading partners, trade with the ASEAN countries and the European Union rose by around 20% y/y each, while trade with the US continued to drop, falling 17%. In addition, China's trade surplus for January-February reached $214 billion, significantly surpassing the $169 billion recorded in the same period last year. It is worth noting that US President Donald Trump is set to travel to Beijing later this month for a much-anticipated leaders' summit.

Japan: Household spending falls again in January, but real wage growth turned positive. Household spending fell 1% y/y in January, well below consensus estimates of a 2.5% rise but improving from December's 2.6% fall. The decline was mainly driven by sharp decreases in housing and education expenditures, which fell by 12% y/y and 23%, respectively. Officials have previously noted that these are volatile categories and may not be indicative of an overall trend. Meanwhile, January’s cash earnings growth increased again to reach a six-month high of 3% y/y, with real wages increasing for the first time in 13 months (+1.4% y/y) compared with a slight decline in December.

 

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