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Daily Economic Update
23.06.2025Oil: Brent pushes higher on Middle East risk. Oil prices rallied in early Monday trading following US strikes on Iran’s nuclear facilities over the weekend. Brent futures surged to a five-month high of over $80/bbl initially before settling back down to $78.5/bbl (+1.9% d/d) as markets looked to gauge Iran’s response, which has so far been muted, and assess the damage done by the US to the country’s nuclear facilities. Iran’s parliament yesterday approved the closure of the Strait of Hormuz, a move more symbolic than actual since the final decision rests with the country’s Supreme National Security Council. A retaliatory response of this sort would not only be self-defeating for an Iranian regime heavily dependent on oil receipts to sustain itself (with China being the largest purchaser of Iranian crude) but would inevitably lead to further US involvement and strikes. Oil prices could spike to well over $100/bbl, according to several assessments, though this would likely be only temporary. So far, tanker tracking data has yet to show any significant disruptions to shipping through the Strait. While the US Vice President, JD Vance, and the Defense Secretary, Pete Hegseth, both said that the US is not seeking to topple Iran’s government, President Trump appeared to contradict them afterwards with his message about possible regime change. Brent’s stronger price action this morning follows a 3.7% w/w gain last Friday amid sharply elevated geopolitical risk and US commercial crude inventory drawdowns, and markets will now be acutely sensitive to any Iranian retaliation that could materialize in the days ahead.
GCC: Regional FDI increases again in 2024, propelled by higher inflows to the UAE and Oman. Foreign direct investment in the GCC rose almost 10% last year to a new high of $73.6 billion, according to the United Nations Conference on Trade and Development’s (UNCTAD) latest World Investment Report 2025. The gain was driven entirely by the UAE and Oman, with eye-catching increases of 49% y/y to $45.6 billion – a record high – and 83% y/y to $8.7 billion, respectively. For the UAE, this was the thirteenth consecutive yearly increase, an unbroken run of gains that stretches back to 2012 and which also includes pandemic-affected 2020, where it was the only GCC country that recorded an increase in investment. The unprecedented level of inflows in 2024, across a range of sectors including energy and IT, places the UAE tenth in the global FDI rankings, and is a testament to the progress the country has made both prior to and under the auspices of its National Investment Strategy 2031. Saudi Arabia, on the other hand, recorded a third consecutive year of FDI declines in 2024, to $15.7 billion, while Kuwait was unable to maintain 2023’s multi-year high rate ($2.1 billion) and saw FDI inflows pare back to $614 million, which is more in line with its longer-term average. Elsewhere in MENA, Egypt stood out with the region’s highest level of FDI inflows ($46.6 billion), thanks largely to the Ras El-Hekma deal signed with the UAE last year.
UAE: Dubai real estate sales eased in May, though remained robust. Overall real estate sales in Dubai increased in May 2025 by 44% y/y to reach AED66.8 billion ($18.2 billion), a new historical peak, though sales volume growth eased to 6% from April’s 55.4% y/y, according to DXB interact. This increase came mainly from the villa segment, which logged double-digit sales (AED24.2 billion) for the second consecutive month, rising by 33% y/y. Moreover, plot sales rose by 63% y/y to AED11.4 billion. On the other hand, apartment sales, which constitute about 44% of total sales, saw marginal yearly growth of only 0.3% to reach AED29.7 billion, due to a decline in first-sales (including off-plan sales). Real estate sales in Dubai remain solid though growth for the remainder of the year could be affected by rising tensions in the region.
Oman: Income tax to be introduced in 2028. Oman’s Ministry of Economy announced a 5% income tax on high income individuals with annual earnings above RO42,000 ($109,000), which will be implemented in January 2028. The new tax serves to augment non-oil revenues, helping to maintain current social and service spending levels, and is part of Oman’s ongoing efforts to promote economic diversification and fiscal sustainability. The efforts have gradually led to visible improvements in fiscal and economic metrics and are reflected in the consistent upgrades to the Sultanate’s sovereign credit rating to the current investment grade level. The ministry noted that the tax will have a minimal impact on GDP (less than 1%) due to high exemption and the relatively low tax rate.
Oman: Inflation eased to 0.6% in May. Consumer price inflation eased to 0.6% y/y in May from 0.9% the previous month. The softer reading was mostly due to faster food and beverage deflation (to -0.8% from -0.3% previously) and softer inflation in the health (to 0.7% from 3.2%) and transportation (to 2.4% from 3.1%) categories. Miscellaneous goods and services inflation eased but continued to record the highest inflation among the various categories at 6.4% (from 6.9% previously). Worth noting is the ninth consecutive month of unchanged prices in the housing category, while inflation in other items was broadly stable. On a monthly basis, prices were unchanged overall.
Japan: Composite PMI edges up in June as factory activity returns to growth. The flash estimate for the au Jibun Bank Composite PMI rose to 51.4 in June, up from a final 50.2 in May. This increase came mainly due to the manufacturing sector, which returned to expansion for the first time since May 2024, and the services sector, which continued to grow. The manufacturing PMI climbed back to 50.4, marking the end of nearly a year of contraction, though export orders remained under pressure from US tariffs and global demand uncertainties. Meanwhile, the services sector PMI accelerated to 51.5, from 51.0 in May, supported by a more rapid rise in new orders and a modest increase in overseas sales. This improvement was accompanied by easing input cost inflation and the fastest rise in employment across both sectors since July 2024. The expansion in both sectors underpins a cautious optimism for economic growth in Q2 2025, which the authorities would welcome following muted growth in Q1 2025.
Global: Geo-political developments, Powell’s testimony to Congress, and flash PMIs in the US and Europe key matters this week. Intensifying geopolitical risk, specifically in relation to how Iran will respond to the US’s strike on its nuclear facilities, is the single most important issue for markets this week. In terms of data releases, in the US, PCE inflation for May will be out on Friday, with the street expecting the core rate to stay unchanged at 0.1% m/m. The S&P Global Flash PMI for June is due later today and is seen weakening for manufacturing (to 51 from May’s 52) and services (to 52.9 from 53.7). Moreover, Fed Chair Powell’s semi-annual Monetary Policy testimony to Congress will take place on Tuesday/Wednesday, where he might share additional clues about the Fed’s anticipated interest rate trajectory. In the Eurozone, the HCOB Eurozone PMI for June is due later today and consensus expectations point to a slight improvement in both manufacturing (to 49.8 from 49.4) and services (50 from 49.7). Similarly, in the UK, the S&P Global Flash PMI for June will be released today, and the street expects some improvement across manufacturing (46.6 versus May’s 46.4) and services (51.3 versus 50.9). Finally, in Japan, Tokyo’s inflation figures for June will be released on Friday, with the consensus projecting a softening to 3.3% y/y from May’s 3.6%. This would come after last week’s country-wide inflation print for May showed entrenched price rises across the core indices.