Trump adds normalization condition to Saudi nuclear deal

Good morning, friends. The escalation we've been tracking took its most serious turn yet over the weekend. The Houthis say they hit Saudi Aramco's Jazan refinery with missiles and drones on Saturday, moving a five-day campaign off the shipping lane and onto the oil itself. And for the first time in years, it's going both ways. Saudi-led coalition forces struck Houthi military sites in Hodeidah on Friday, and the internationally recognized Yemeni government's air force also went on the offensive in Marib and Al Jawf.

Beneath the smoke, the capital machine keeps running. PIF signed USD 24.5 bn in MoUs with the World Bank's private-sector arms and the US EXIM bank to pull outside capital into its portfolio companies. Aramco, meanwhile, is pushing ahead on its USD 100 bn Jafurah gas play, with contractors already bidding phase five while phase four's engineering work has barely started.

AND- Regional M&A is still bleeding — down 47% y-o-y to USD 48.7 bn in 1H — though the deal count barely moved, which tells you the deals just got smaller.

BUT FIRST- Just one day after the US and Saudi Arabia signed a civil nuclear cooperation agreement, US President Donald Trump bolted on a condition that could unravel it. The agreement, Trump said, “will be approved, but is totally subject to Saudi Arabia joining the very respected and successful Abraham Accords,” and that there would be “no enrichment” of nuclear material. Press Secretary Karoline Leavitt confirmed the normalization demand is now a requirement: “If they don't join the Abraham Accords, the deal is off.”

This isn’t the first time the US has tried to use business (and this agreement in particular) to push Riyadh to normalize ties with Tel Aviv. It also wouldn’t be the first time Riyadh hasn’t played ball. Under the Biden administration, Saudi Arabia maintained its refusal to recognize Israel and establish diplomatic relations with the country without an “irreversible and time-bound path” to the creation of a Palestinian state, which the Netanyahu government has ruled out, all the more so amid the Gaza war.

Israel is reacting selectively: Prime Minister Benjamin Netanyahu’s office publicly welcomed the potential normalization as “an historic leap forward” while his political rivals have been vocal about their qualms with the deal. Naftali Bennett, who is looking to return as Israel’s prime minister in elections later this year, called it “a serious strategic failure that endangers our security.” Former defense minister Avigdor Lieberman also warned the agreement would end with Saudi Arabia developing a nuclear weapon, urging Tel Aviv to lobby the US Congress to kill it.

What’s next: Washington is in an active war to dismantle Iran’s nuclear program while greenlighting a Saudi one, feeding arms-race fears. The pact heads to Congress, which would need a veto-proof majority to block it.

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Warner Bros. deal clears EU hurdle

Paramount’s PIF-backed USD 110 bn Warner Bros. Discovery buyout cleared Brussels this week, but it’s clearing regulators faster than it’s clearing courts. The European Commission signed off on the acquisition, conditional on Paramount ending its European distribution tie-up with Universal within 13 months of closing, the Commission said. It’s the latest of some 65 jurisdictions to clear or decline to challenge the merger, Bloomberg reports.

A US federal judge paused the Gulf-backed tie-up on a “strong showing” it hurts competition, after 12 states sued to block it. The deal is bankrolled by the PIF and the Qatar Investment Authority through L'imad Holding.

What’s next: A US hearing on 3 August decides whether the pause holds until trial. Every day past September the transaction doesn’t close costs Paramount ticking fees owed to WBD shareholders — and a courtroom loss could trigger a USD 7 bn termination fee, on top of the USD 2.8 bn it already paid Netflix to walk away.

Joint bid for KAFD cooling?

I Squared Capital and Saudi Tabreed reportedly submitted a joint bid for the district cooling assets at King Abdullah Financial District (KAFD), three sources familiar with the matter told Reuters. The two started as competing bidders before merging their offers. Saudi Tabreed is the existing operator of KAFD’s cooling network and is part-owned by PIF, Abu Dhabi’s National Central Cooling Company, and UAE-listed Tabreed.

REMEMBER- KAFD was in advanced discussions to sell the assets — which deliver chilled water to cool offices, industrial, and residential buildings — for USD 500 mn, with both Saudi Tabreed and UAE Tabreed showing interest in the transaction. The joint bid follows I Squared’s USD 2 bn co-investment agreement with PIF earlier this month, targeting up to USD 1 bn each in digital infrastructure and district cooling. KAFD’s cooling assets fit that bill.

What’s next? KAFD’s board is evaluating the bids, two sources told the newswire.

Pump it out

OPEC+ will likely wave through another output-target hike from September when it meets on 2 August, three sources told Reuters, expecting the same roughly 188k bbl / d bump as June, July, and August. The seven core producers, including Saudi Arabia, Iraq, and Russia, are racing to reclaim market share for when the Iran war ends.

The catch: The cartel can’t actually pump out the quotas they set. Group output sank to 36.28 mn bbl / d in June, down from nearly 43 mn bbl / d pre-war, with Hormuz throttled and Houthis now hitting Saudi tankers.

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The big story abroad

A handful of headlines are capturing the attention of the foreign pages this morning — those include:

After 13 straight nights of heavy bombardment, Washington halted airstrikes over Iran over the weekend without any official explanation. While US President Donald Trump indicated that a “massive attack” on the Islamic Republic remains under consideration, the pause may stem from concerns that the conflict is depleting Washington’s stockpile of air defense weapons and anti-missile interceptors. Iranian state media did not report any strikes over the weekend.

Investors are wagering on a Federal Reserve rate hike as soon as this Wednesday, amid a spike in oil prices following the recent regional geopolitical escalations. Markets are now placing a 38% probability of a quarter point hike, up from 13% last week, according to CME Group data.

Also in the region: Private equity giants Blackstone, KKR, and Brookfield agreed to buy a USD 16 bn stake in Kuwait’s national oil pipelines network, securing a 49% stake in a JV alongside the Kuwait Petroleum Company. The companies will lease and rent back the country’s 320 km pipeline infrastructure. The transaction marks Kuwait’s largest foreign direct investment ticket.

Fed up with costs, companies thrift AI models: US Firms are embracing lower-priced AI models, including China-made software, in addition to OpenAI and Anthropic’s offerings. Businesses are realizing that expensive models being touted as the most powerful are not appropriate for mundane tasks, resulting in a pivot to a so-called “tokenomical” mindset.

Wildfires in France and Spain have prompted the evacuation of some 260k people. Drought conditions and extreme heat have exacerbated out-of-control forest fires this summer. In France alone, just under 98k hectares have been burned, marking a new record.

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Plus, the hotels, restaurants, and openings worth checking out this summer.

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