THIS MORNING: Saudi inflation to stay “contained” in 2026, says ENBD

Good morning, friends. We kick off what is shaping up to be a busy news day with a war update after the Defense Ministry said it intercepted three drones entering the Kingdom from Iraqi airspace. The ministry did not specify what the drones were targeting or who launched them, but it asserted its right to respond.

WEATHER- Dusty days: Dust storms are expected to pick up across parts of Najran, Makkah, Madinah, Qassim, Hail, Tabuk, Al Jawf, and the Northern Borders today, with near-zero visibility possible in parts of Riyadh and the Eastern Province.

• Riyadh: 38°C high / 25°C low;
• Jeddah: 41°C high / 27°C low;
• Makkah: 46°C high / 29°C low;
• Dammam: 36°C high / 24°C low.

Watch this space

ECONOMY — Saudi Arabia’s inflation is expected to “stay contained” this year, Emirates NBD Senior Economist Daniel Richards wrote in a report (pdf). The outlook is supported by easing housing costs, a strong USD, and regulated fuel prices — factors that could help the Kingdom outperform regional peers even if inflation picks up in the coming months.

Prices are calm for now: The annual headline inflation rate cooled to 1.7% in April, down from 1.8% in March, supported by higher government spending on fuel and food subsidies in 1Q. Higher oil prices from Hormuz’s closure could keep price increases sticky for now.

CAPITAL MARKETS — The first ETF market maker under new Saudi Exchange rules is here. Sab Invest secured approval from the Saudi Exchange to act as a market maker for its Quant EFT, becoming the first entity to do so under the Exchange Traded Funds Market Making Framework, according to a Tadawul disclosure. Under the arrangement, Sab Invest will be required to maintain a minimum order presence of 80%, a minimum order size of SAR 50k, and a maximum spread of 2%.

So… what’s an ETF market maker? They are exchange members tasked with supporting liquidity in listed ETFs by continuously posting buy and sell orders. Under the Saudi Exchange framework (pdf), market makers — in agreement with the fund manager — can choose between three commitment tiers, with requirements tied to spreads, order size, and market presence. To qualify for incentives, including waived trading and regulatory fees, they must meet daily obligations such as maintaining a minimum order size of 50k shares, remaining active for at least 80% of the trading day, and keeping spreads within set limits.

TRADE — The long-awaited freetrade agreement between the UK and Gulf states is nearing completion, with both sides aiming to close an agreement-in-principle “within days,” the Financial Times reports, citing sources it says are in the know. GCC Secretary General Jasem Albudaiwi, who confirmed last week that the parties made “significant progress,” is set to visit London this week, one of the sources said.

What to expect: The two sides aim to cooperate on financial services, health and life sciences, industrial growth using new technologies, creative industries, and education, Country Director for Saudi Arabia at the UK’s Department for Business and Trade Pete Ashby told EnterpriseAM last year. The UK’s luxury automotive and financial services sectors stand to benefit the most from the trade pact, the FT said.

Data point

7.7k — that’s the number of new investment registrations issued in 1Q 2026, up 50% y-o-y, the Investment Ministry said on X. Construction accounted for the largest share with 2.5k registrations (+20%), followed by wholesale and retail trade at 1.6k (surging 213%), and manufacturing and industrial activities with 969 registrations (+42%).

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The big story abroad

We got a raft of business and geopolitical updates this morning. The US and Iran seem no closer to a final resolution, with President Donald Trump warning Tehran that “the clock is ticking.” Iranian media claims that Washington has demanded the removal of the nation’s uranium stockpile without proposing tangible concessions in return. A drone strike on the UAE’s Barakah nuclear power plant has heightened tensions in the region.

Meanwhile, in the world of M&A: French advertising group Publicis Groupe is acquiring data collaboration company LiveRamp in a USD 2.2 bn transaction, expanding its foothold in the AI marketing space. The move will allow the group to create proprietary data for clients and develop intelligent AI agents.

And on Wall Street: Investors are sounding the alarm over an apparent market paradox, where bullish sentiment prevails in stocks while bond yields rise sharply, leading some to believe that a drastic shift is overdue. Despite positive market sentiment over robust first-quarter earnings and AI-related developments, higher yields portend costlier corporate spending and a safe haven to draw investors away from equities.