Happy Thursday everyone!

Markets are reeling as the global trade war intensifies. Oil prices have plunged to four-year lows after China escalated tariffs on U.S. goods, sending shockwaves through energy and equity markets. Abu Dhabi Investment Group’s chief warns the $14 trillion in disrupted trade is “just the beginning,” likening the situation to the Great Depression. Yet amid the turmoil, EFG Hermes says the UAE is the most well-positioned economy in MENA to weather the storm, with strong fiscal buffers and limited oil dependency. A weaker dollar could even give Dubai a surprising boost in the months ahead.

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UAE Most Well-Positioned in MENA to Weather Economic Crisis: EFG Hermes Head of Research

📰 What is it about?

• In the wake of the U.S.’s sweeping new tariff regime and growing fears of a global economic slowdown, EFG Hermes’ Head of Research Ahmed Shams El Din told Enterprise that Dubai may be one of the more resilient economies in the region.

• Speaking at EFG’s annual One-on-One investor conference in Dubai, Shams El Din said a depreciating U.S. dollar could actually benefit Dubai, thanks to its economic structure and diversified revenue streams.

• The comments come as investors and policymakers brace for the ripple effects of Trump’s tariff-induced market turmoil, which has already triggered significant drops in equities, weakened global growth forecasts, and raised fears of inflation.

💡 Why it matters?

• Dubai’s Resilience: Shams El Din emphasized that Dubai’s economy is more diversified and regulated than during past crises, and less exposed to oil shocks. Its fiscal breakeven oil price hovers around the high-$50s to low-$60s, making it more stable in the face of falling crude prices.

• UAE’s Stronger Position: The UAE’s current and fiscal accounts are well-buffered, with greater liquidity compared to Saudi Arabia, offering room for maneuver in case of broader economic headwinds.

• FX Tailwind: A weaker dollar, potentially a consequence of ongoing economic strain in the U.S., could stimulate tourism, trade, and investment in Dubai — sectors typically sensitive to currency fluctuations.

• Emerging Market Exposure: While Dubai is well-positioned, it remains vulnerable to emerging market cycles, which could still impact capital flows and investor sentiment.

🔜 What’s next?

• Focus on Abu Dhabi: Shams El Din highlighted positive signs in Abu Dhabi’s financial strategy, noting sovereign and quasi-sovereign reforms aimed at making the capital more market-reflective.

• Capital Market Growth: The key challenge now, he said, is ensuring Abu Dhabi’s policy reforms translate into real growth across equity, debt, and capital markets.

• Watching the Dollar: If the USD continues to weaken, as some analysts expect in light of rising U.S. deficits and inflation, Dubai’s economy could gain momentum, offering a relative bright spot in an otherwise uncertain global outlook.

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Markets

Abu Dhabi Investment Group Chief: The $14 Trillion in Affected Trade is Just the Beginning

📰 What is it about?

• Former U.S. President Donald Trump has imposed sweeping new tariffs, targeting hundreds of billions of dollars in imports from China, Europe, Canada, and other major economies.

• China retaliated forcefully, imposing steep tariffs on U.S. goods, including aerospace parts, agricultural products, and automobiles.

• The result? A global trade war now putting trillions of dollars in commerce under threat — an economic ripple effect that could echo worldwide.

• Chief of Abu Dhabi Investment Group Zayed bin Aweidha told The National that the $14 trillion in affected trade is just the beginning, likening the current economic backdrop to the 1929 crash that led to the Great Depression.

💡 Why it matters?

• Global Growth Under Threat: The OECD has cut growth forecasts, warning that prolonged tariffs could push the world into a low-growth, high-inflation spiral.

• Rising Costs for Consumers and Businesses: Tariffs on electronics, cars, and industrial components are driving up prices—UBS estimates a new iPhone could cost $350 more.

• Supply Chain Chaos: Aircraft, vehicles, and electronics are made from globally sourced parts. Tariffs on jet engine components from GE and Safran, for example, ripple across the aviation sector.

• Markets React Sharply: The S&P 500 has dropped over 15% this year; the Nasdaq is down more than 20%, as investor sentiment turns bearish.

• Job Losses and Inflation: Economists like Larry Summers predict up to 2 million U.S. jobs could be lost, with the average household losing $5,000 in income from trade-related inflation.

🔜 What’s next?

• Recession Risks Rising: Goldman Sachs now sees a 45% chance of a U.S. recession, while others warn of a broader global downturn.

• Airlines and Heavy Industries Squeezed: Tariff-induced cost hikes are hitting capital-intensive sectors like aviation and manufacturing the hardest.

• Pressure on Governments: Expect intensifying calls for diplomatic off-ramps, stimulus packages, and domestic support programs to cushion the blow.

• Uncertain Path Forward: With over $14 trillion in trade disrupted and little sign of de-escalation, Zayed’s warning of a "snowball effect" may soon become a reality few are prepared for.

Oil Prices Plunge To Four-Year Lows As China Escalates Tariff War With US

📰 What is it about?

• Oil prices dropped to their lowest levels in four years after China announced a steep escalation in tariffs on U.S. goods, marking the latest move in the ongoing trade war.

• China’s finance ministry confirmed tariffs will rise to 84% from the previously announced 34%, effective Thursday.

• Brent crude fell $4.02, or 6.4%, to $58.80, while WTI dropped $4.03, or 6.76%, to $55.55 as of late Wednesday morning GMT.

• President Trump’s new 104% tariffs on Chinese goods came into effect at 12:01 a.m. EDT, significantly upping the ante in the trade dispute.

• The European Union is also expected to approve its first round of countermeasures, joining China and Canada in retaliatory steps.

💡 Why it matters?

• Global recession fears are intensifying, as trade tensions between the world’s two largest economies deepen.

• Analysts warn that China’s oil demand growth of 50,000 to 100,000 bpd is now at risk, though domestic stimulus efforts could soften the blow.

• Investor confidence is shaken, with both Brent and WTI posting five straight sessions of losses since the U.S. tariff escalation was announced.

• OPEC+’s recent decision to raise output by 411,000 bpd in May may further push the market into oversupply territory.

• Some U.S. analysts believe the White House aims to drive prices closer to $50/barrel, but critics say this could force U.S. producers to shut down operations, giving OPEC an upper hand.

🔜 What’s next?

• Goldman Sachs revised its oil price outlook, forecasting Brent at $62 and WTI at $58 by December 2025, dropping to $55 and $51 by the end of 2026.

• Russia’s ESPO Blend fell below the $60 Western price cap for the first time, signaling growing market strain.

• On a brighter note, U.S. crude inventories declined by 1.1 million barrels, defying expectations of a build—offering a glimmer of support for prices amid the turmoil.

🔍In other news…

• Saudi Arabia makes 14 new oil and natural gas discoveries.

• Crashing global stock markets put a pause on Gulf IPOs.

• How UAE residents expect to pay the price of Trump tariffs.

• Awqaf Abu Dhabi considers data centre investment amid push into defensive sectors.

• 47 global companies express interest in developing 7th phase of Mohammed bin Rashid Al Maktoum Solar Park.

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