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Daily Economic Update
30.06.2025Oil: Prices drop sharply back to pre-Iran-Israel conflict levels. International crude oil marker Brent dropped 12% last week to close at $67.8/bbl on Friday (-9.2% ytd), roughly the level it was before the outbreak of hostilities between Israel and Iran. This was the biggest weekly fall in more than two years and came as the geopolitical risk premium attached to the Iran-Israel conflict all but disappeared, with both sides honoring the tentative ceasefire that was brokered by President Trump. That speculators assessed the conflict to be on ice was evident in futures market positioning, with the number of bearish contracts (shorts) surging last week by the most in a year. Markets are also back to focusing on fundamentals and looking for substantive progress in ongoing trade negotiations between the US and its trade partners. On the supply side, meanwhile, markets are assessing the probability of another accelerated supply hike by OPEC-8 when it meets next week to decide on August production as being very high. This would be the fourth consecutive month that OPEC-8 unwinds its supply cuts at the faster monthly rate of 411 kb/d, essentially implying that by October all of the 2.2 mb/d of these cuts would have been theoretically restored, almost a year ahead of schedule. Also on the supply side, President Trump remarked that he might be open to removing or watering down US sanctions on Iran’s energy exports “if they can be peaceful.”
Kuwait: Ministry of Finance hikes public land rents. The ministry of finance announced draft amendments to decision 40 of 2016, involving a comprehensive repricing of public land rents and related administrative fees. The ministry estimates that the new framework, due to be effective from July 1, would more than double the public revenue from land rents to KD156mn (from KD70mn in FY 24/25). Some notable revisions include increasing the waterfront land rent to KD 250/meter, five times the previous rate, in addition to revised rates for fuel stations, parking lots, and commercial, educational and sports facilities on public land. Agricultural land was exempt from any changes to support food security. All sub-leased land will be subject to a 30% tax on rental income. The change follows previous revisions in 2022 and is part of ongoing efforts to expand non-oil public revenues, which remained low at 7.3% of total receipts in FY23/24. A more extensive review of government services fees is expected soon, potentially including water and electric tariffs and fees related to hospital, judicial, customs, stamp duties, and other services, which together could amount to a more significant increase in public revenues depending on the scope and magnitude of rate increases. Government revenue will also be supported by the corporate income tax on large multinationals, enacted in January, and the expected implementation of an excise tax early next year, which could yield a combined of around KD400-450mn annually according to previous government estimates, with the full fiscal impact expected in FY26/27.
Saudi Arabia: Unemployment drops to a record low in Q1. Official data released by the general authority for statistics showed that the unemployment rate fell to a record low of 2.8% in Q1 2025, down from 3.5% in the previous quarter. Unemployment among Saudi citizens also eased to a record low of 6.3%, with female unemployment falling by 1.4 percentage points from the previous quarter to 10.5%. Lower unemployment came despite an increase in the labor force participation rate to 68.2%, with the female participation rate also edging up to 36.3%. The sustained strong expansion of the non-oil economy, thanks to Vision 2030 initiatives, has led to continued job creations, which have helped to absorb a growing labor force, with Saudi employment in the private sector reaching 50.3% in Q1. The Kingdom has also continued to promote digital platforms such as Jadarat, a unified national system for matching candidates with prospective employers.
China: Manufacturing activity improves but remains in slump, while non-manufacturing one strengthens. China’s NBS general PMI (composite) improved to its three-month high of 50.7 in June from 50.4 in May. The manufacturing PMI, while still in contraction for a third straight month, slightly inched up to 49.7 in June from May’s 49.5 on improvements across production, new export orders, backlog and finished goods inventory. A preliminary trade pact with the US may have helped ease factory activity downturn in June. However, the gauge of future activity, though still expanding, moderated to a nine-month low of 52, suggesting a cautious outlook ahead. Meanwhile, the non-manufacturing PMI (including services and construction) ticked up to a three-month high of 50.5 from 50.3 in May, on strengthening construction activities (to 52.8 from 51). However, services activity stagnated to 50.1 from 50.2 in May, underscoring an overall mixed performance outside of manufacturing amid relatively sluggish consumer spending.
Global: US GOP bill and tariff/trade updates as well as June’s jobs data key matters this week. After the US Senate cleared an important procedural vote yesterday, Trump’s ‘Big Beautiful Bill’ now moves forward for a final Senate vote before being sent to the House again. This, along with tariff and trade developments ahead of the July 9 deadline, would be the key matters to monitor this week. In addition, markets will be looking to comments by the heads of the Fed, ECB, BoE, and BoJ on Tuesday during the ECB’s annual retreat in Portugal. In terms of data releases, in the US, June’s job report is due on Thursday (Friday being a public holiday in the US) and the street expects a slower job gain of 110K from May’s 139K and a slightly higher unemployment rate of 4.3% versus 4.2%. Any surprises in the unemployment rate should particularly attract more attention given sharp increases in continuing jobless claims in recent weeks. ISM PMIs for June are due on Tuesday for manufacturing (consensus forecast of 48.8 from May’s 48.5) and on Thursday for services (forecast of 50.5 versus May’s 49.9). In the Eurozone, June inflation is due on Tuesday with consensus estimates pointing to a slight increase in the headline rate to 2% y/y from 1.9% but a steady core rate of 2.3%. In the UK, the Nationwide house price index for June is due on Tuesday and the street forecasts a softer gain of 0.2% m/m (3.3% y/y) after a 0.5% increase in May. Finally, in Japan, the BoJ’s Tankan Index, a gauge of sentiment among large manufacturers, for Q2 will be released on Tuesday with the street expecting a decline driven by concerns over US tariffs.