Oil sinks as traders bet #Iran’s attack in #Qatar will lead to de-escalation

Oil sinks as traders bet Iran’s attack in Qatar will lead to de-escalation

Oil prices tumbled on Monday afternoon in a sharp turnaround as traders interpreted Iranian missile strikes against a US air base in Qatar as a sign that it is likely to avoid attacking energy infrastructure in the region. 

Brent crude, the international benchmark, dropped almost 6 per cent to $71.11 a barrel in the aftermath of the attacks, which targeted the Al Udeid air base near Doha, where 10,000 US troops are stationed. Qatar said it had successfully repelled the attacks. 

Crude had traded as high as $81.40 a barrel earlier on Monday amid concerns that Iran would target oil infrastructure or attempt to close the Strait of Hormuz in retaliation for a US attack on Iranian nuclear facilities at the weekend. 

West Texas International, the US benchmark, fell by a similar amount to below $70, largely giving back gains made since Israel launched its surprise attack against Iran’s nuclear facilities and air defences 10 days ago. 

“Iran’s decision to retaliate via a well telegraphed missile attack on US bases implies that they are less likely to weaponise oil,” said Michael Alfaro, chief investment officer at Gallo Partners, a hedge fund focused on energy and industrials. 

He said prices should remain generally elevated given the increased tensions, but fundamentals continue to suggest the oil market was well supplied. 

Rory Johnston, an oil market researcher at Commodity Context, said a sell-off in crude “looks a lot like the market is interpreting this latest move as inherently de-escalatory”. 

He said the move by Iran on Monday looked similar to a situation during Donald Trump’s first term as president in 2020, when Tehran retaliated against the US’s killing of its top military official by firing missiles at Iraqi bases hosting US troops. In that case, Tehran telegraphed the attack to Trump through back channels in advance. 

Despite suggestions from some Iranian hardliners that Tehran should respond to the US strikes by blocking traffic through the Strait of Hormuz, the channel for about a quarter of the world’s seaborne oil trade, crude supply from the Middle East is still unaffected by the escalating conflict. 

But the elevated prices have nonetheless prompted jitters in Washington. Trump on Monday urged American oil companies to pump more oil, warning that allowing prices to rise would benefit Iran. 

“EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!” he wrote on his Truth Social Platform. 

He later wrote: “To The Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!” 

While a small proportion of US oil is produced on federal lands, the vast majority is privately operated, meaning the government has little control over output volumes. 

“The hard truth is that any president has only limited options to affect the price of crude oil,” said Bob McNally, president of Rapidan Energy and an energy adviser to former president George W Bush.

 

“The best policy to avoid a further price hike is to, as [secretary of state Marco] Rubio has, dissuade Iran from pulling the oil trigger: from attacking or disrupting Gulf energy production flows. That is the best option to avoid a further price hike.” 

Trump’s predecessor Joe Biden tapped the US Strategic Petroleum Reserve — a vast emergency stockpile of crude — to help bring down prices after Russia’s full-scale invasion of Ukraine in 2022, but the effects took time to trickle through.

#Kuwait Starts Mobilizing Banks for $6 Billion Bond Sale - Bloomberg

Kuwait Starts Mobilizing Banks for $6 Billion Bond Sale - Bloomberg

Kuwait has started the process of sending a request for proposal to banks to raise about $6 billion from international debt markets, according to Ministry of Finance officials.

The OPEC-member started approaching banks earlier today and is still in the process of contacting others, the officials said, asking not to be named. The offering is for dollar-denominated bonds, for the current fiscal year ending March 31, 2026, the officials said.

Kuwait said in May it plans to raise as much as 6 billion dinars ($20 billion) in the 2025/26 fiscal year across both local and international bond sales, marking its first foray into debt markets in eight years.

The funds, part of a five-year strategy, will be used to finance development projects.

Kuwait’s cabinet in March approved a long-awaited law that paved the way for the Gulf nation to sell international debt for the first time since 2017. The legislation, held up for years by political wrangling, allows for a debt ceiling of 30 billion dinars over 50 years.

The finance ministry is also in the process of raising 500 million dinars from local financial institutions, two officials said.

The oil-dependent country’s been forced to dip into its much-depleted General Reserve Fund to finance its budget deficit. Last year, the fund sold some assets to the Future Generations Fund, which along with the GRF, is managed by the Kuwait Investment Authority.

Kuwait is a key US ally in the Middle East and one of the world’s biggest oil exporters. Its sovereign wealth fund is valued at over $1 trillion. The country’s last issuance was at $8 billion in March 2017, just days before the previous debt law expired.

Kuwait has little external debt and is rated A1 by S&P Global Ratings alongside China and Japan.

Citigroup Inc., JPMorgan Chase & Co., HSBC Holdings Plc and Standard Chartered Plc arranged Kuwait’s 2017 sale.

#Oman Plans Income Tax on Top Earners in a First for Gulf States - Bloomberg

Oman Plans Income Tax on Top Earners in a First for Gulf States - Bloomberg

Oman has announced plans to impose income tax, becoming the first Gulf state to do so in an effort to broaden its sources of public revenue beyond oil.

The 5% levy won’t take effect until 2028 and only applies to annual income of 42,000 rials ($109,000) or above, state-run Omani News Agency said late Sunday. That means that only the top 1% of earners will have to pay the tax, according to the economy ministry.

Minister of Economy Said bin Mohammed Al-Saqri said the measure will reduce reliance on oil income by diversifying public revenue while maintaining social spending.

No country in the oil- and gas- rich Gulf Cooperation Council, which has six members, has income tax. For the likes of Saudi Arabia, the United Arab Emirates and Qatar, that’s a big draw for foreign workers, and Oman’s move will be closely watched by the others.

“While the scope is narrow, it will still be a significant fiscal development in the region,” said Monica Malik, chief economist of Abu Dhabi Commercial Bank. “Oman is looking to progress with fiscal reforms while still remaining competitive. This is especially at a time when high-net-worth individuals are moving to the region.”

Though the GCC states tend to have solid fiscal balances — only Saudi Arabia and Bahrain are set to have deficits this year — the International Monetary Fund has said they may eventually need to introduce such taxes to diversify their revenue base, especially if demand for fossil fuels wanes in the coming years.

Oman has been enacting fiscal reforms as part of its economic diversification to reduce its reliance on the oil, an objective it shares with other Gulf countries. The sultanate has raised funds via privatizations, including a record $2 billion from the initial public offering of its state energy company’s exploration and production unit last year.

Oman’s income tax “could act as a catalyst to other GCC countries implementing the tax as well in the future,” said Malik.

Most Gulf markets in black despite regional conflict | Reuters

Most Gulf markets in black despite regional conflict | Reuters

Most stock markets in the Gulf ended higher on Monday amid rising oil prices, as investors anxiously waited to see if Iran would retaliate against U.S. attacks on its nuclear sites.

Oil prices touched a five-month high before paring gains on Monday as oil and gas transit continued on tankers from the Middle East after U.S. airstrikes against Iran at the weekend.

Market participants expect further price gains amid mounting fears that an Iranian retaliation may include closing the Strait of Hormuz, through which roughly a fifth of global crude supply flows.

Saudi Arabia's benchmark index (.TASI), opens new tab advanced 1.3%, buoyed by a 1.6% rise in Al Rajhi Bank (1120.SE), opens new tab and 1.5% increase in the country's biggest lender Saudi National Bank (1180.SE), opens new tab.

Investors downplayed the potential for further escalation in the regional military conflict. This sentiment follows the possibility of peace talks, though the probability of such discussions remains low. This upward movement could be temporary, as volatility and uncertainty persist, said Hani Abuagla Senior Market Analyst at XTB MENA.

"The situation could worsen if Iran closes the Strait of Hormuz, which would disrupt oil supplies and potentially lead to further military escalation."

Dubai's main share index (.DFMGI), opens new tab climbed 1.1%, led by a 2.8% rise in blue-chip developer Emaar Properties (EMAR.DU), opens new tab and a 1.8% increase in sharia-compliant lender Dubai Islamic Bank (DISB.DU), opens new tab.

According to Abuagla, improved investor risk appetite returned to support the Dubai market. The focus has shifted back to the healthy economic fundamentals, which could foster further recovery if this trend continues.

In Abu Dhabi, the index (.FTFADGI), opens new tab closed 0.5% higher.

The Qatari index (.QSI), opens new tab rose 0.5%, with petrochemical maker Industries Qatar (IQCD.QA), opens new tab gaining 0.8%.

Gulf states, home to multiple U.S. military bases, were on high alert on Sunday, with their leaders calling on all parties to exercise maximum restraint following U.S. strikes on Iran that raised the possibility of a wider conflict.

Nuclear authorities in Saudi Arabia and the UAE said they had not detected signs of nuclear contamination following the strikes in Iran.

Outside the Gulf, Egypt's blue-chip index (.EGX30), opens new tab increased 1.2%, with investment bank EFG Holding Co (HRHO.CA), opens new tab jumping 7.2%.