THIS MORNING: Jazan is under fire again

Good morning, friends. The Hormuz premium has been in the numbers for a while, but this morning it’s on both sides of the ledger.

Riyadh Air’s cargo arm is booking the upside: Shippers who have run out of patience with the long way around are buying belly space, and the demand is concentrated exactly where the water is most contested. The construction sector is paying the downside, with the detour showing up in materials and schedules.

What’s underneath both is a rebasing. Growth in construction is holding, but the composition has changed: housing and infrastructure are carrying it while contractors step back from decade-length giga-commitments. And PIF’s new coastal play at Al Khafji near the Kuwaiti border is notable less for its ambition than for its proportions.

PSA

Taxis from Saudi Arabia and Bahrain can now carry passengers across the King Fahd Causeway. The service kicked off on Sunday under new rules agreed upon by authorities in both countries. Only officially licensed taxis that meet technical and safety requirements can make the crossing, with vehicles required to be no more than five years old.

Jazan’s third fire

Saudi Arabia’s western oil hub is under fire again: Saudi Aramco’s oil facilities in Jazan were struck yesterday, with the damage still being assessed, The Financial Times reports, citing two people familiar with the matter. The city is home to Aramco’s 400k bbl / d refinery and associated energy facilities. The Houthis have not claimed responsibility for the attack.

This is the third major attack on Jazan in about six weeks. The Houthis claimed a drone strike on the refinery on 9 August, which came after missiles and drones struck the same plant on 27 July, forcing Aramco to shut it down and tightening Riyadh’s fallback map.

Jazan had already become a less reliable outlet as the fighting shifted west. The refinery shipped unusually high volumes of refined products during the first months of the US-Iran war, as disruptions around Hormuz have squeezed Saudi exports from the Gulf. Those flows fell sharply after Houthi attacks on Saudi Arabia resumed, with no refined products shipped from Jazan during August.

Close enough?

Riyadh won’t sign the International Atomic Energy Agency’s (IAEA) additional protocol — the tool that gives the UN nuclear watchdog its most sweeping inspection powers — but it’s negotiating something bespoke to sit in its place, Reuters quotes IAEA chief Rafael Grossi as saying.

The bilateral provisions under discussion would authorize the agency to monitor uranium enrichment, conversion, and reprocessing specifically, Grossi said. These are the same three activities the US-Saudi civil nuclear pact, inked in July, left open when it dropped the “gold standard” commitment to exclude them. Grossi’s statement comes after a Wall Street Journal report indicated that Riyadh has a path to enrich uranium to nearly 20% under the nuclear agreement.

Saudi Arabia is preparing measures that would go beyond its core obligations under its comprehensive safeguards agreement, Grossi said, without matching the additional protocol’s reach.

What’s next? Once finalized, the bilateral agreement between the IAEA and Saudi Arabia will be submitted to the agency’s 35-member Board of Governors for review.

To the main market

Cardboard manufacturer Paper Home wants to move to Tadawul. The company’s board greenlit the decision to transfer from Nomu to the main market, the firm said in a Tadawul filing. Now it needs to meet market listing requirements and Tadawul’s go-ahead. The company tapped Watheeq Financial as adviser for the process.

The Nomu-to-Tadawul jump round-up so far: Alwasail Industrial and Nofoth Food Products moved up in January, followed by Armah Sports and Ladun Investment in August. Meanwhile, Tam Development, Waja, and ASG Plastic Factory are all eyeing a move to the main market.

120 in sight

Goldman Sachs expects oil prices to rise as high as USD 120 a barrel if attacks on shipments in the region intensify, co-head of Global Commodities Research at Goldman Sachs told Bloomberg. The bank sees a lower target of USD 80 if regional exports normalise, while recommending that investors capitalize on natural gas and diesel to hedge against broader supply disruptions.

Energy prices have rallied amid the more than six-month war, with natural gas and refined products outperforming crude. Diesel prices have more than doubled this year, while Struyven said supply shocks are proving larger in gas and refined products than in the crude market. Brent crude currently stands at USD 98 a barrel while WTI crude reached USD 93 a barrel.

China is expected to remain a “stabilizing force” in crude markets by curbing imports as prices rise, Struyven said. The country is not predicted, however, to play the same role in natural gas and refined products.

The regional escalations are already in action: The US escalated its standoff with Iran around the Strait of Hormuz, striking three Iranian oil tankers and maintaining a naval blockade of ports after Iranian attacks on US warships, Reuters reports. Tehran threatened to retaliate over further US strikes and plans to establish a new restricted maritime zone beyond the strait, stretching from the US blockade line into parts of the GCC, Iranian security official Mohasen Rezaei said. Vessels entering the area could be added to Iran’s sanctions list, he added.

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The big story abroad

It appears that a key obstacle to resolving the regional conflict is being removed. Iran has signaled that an agreement to facilitate shipping through the Strait of Hormuz is close to finalization after weeks of negotiations with Oman. The arrangement will involve determining a temporary safe route through the waterway for energy supplies, according to Iranian Foreign Ministry spokesperson Esmail Baghaei.

Africa’s biggest IPO yet is on the horizon. Nigeria’s Dangote Petroleum Refinery and Petrochemicals aims to list 4.1 bn shares at USD 0.4 a pop on the country’s stock exchange, launching what would be the continent’s largest-ever IPO. The company — led by Aliko Dangote, Africa’s richest man — is looking to raise at least USD 1.6 bn from retail investors across the continent, offering them two shares without charge provided they are held for a specified period.

Chinese memory maker to list in Hong Kong: China Shenzhen Longsys Electronics — one of the world’s largest independent memory module manufacturers — is set to start trading in Hong Kong today, after raising USD 903 mn in an upsized share sale. The Chinese firm's debut will test investor confidence in the AI infrastructure expansion and volatile memory prices, which have surged this year due to tight supply.