Good morning, friends. The beginning of a new week brings with it a meaty issue that’s leaning a bit economy-heavy — but with plenty of news across the spectrum to give us a full-rounded view.

We’re starting things off with the final inflation reading of 2025, which points to still-hot housing and chemicals markets that continued to drive price growth throughout last year. Meanwhile, Fitch reaffirmed our A+ sovereign rating, thanks in large part to our fiscal buffers and external balance sheets, which are expected to remain strong even as the Kingdom ramps up borrowing.

AND- PIF is reportedly looking to go back to market with more IPOs for its portfolio companies, while it also looks at potentially selling down its holdings in other already-public companies, according to unconfirmed reports.

TRANSPORT — Plans for the long-delayed Jeddah Metro are being revived, with the government issuing a preliminary design consultancy tender for the project’s Blue Line, Meed reported on Thursday. The move marks the first concrete step to revive the scheme after years of reassessment, signaling a renewed push to expand public transport infrastructure in the Kingdom’s second-largest city.

The network: The Blue Line will span around 35 km, linking King Abdulaziz International Airport with the Haramain High-Speed Railway station, and is planned to include 15 stations under the supervision of the Jeddah Development Authority. The wider metro program comprises four lines stretching more than 161 km, with 81 stations and 197 trains.

BACKGROUND- Plans for the Jeddah Metro date back to the early 2010s, with several international firms appointed to advance early-stage work, including France’s Systra, the US-based Aecom, and UK architectural firm Foster + Partners. However, progress stalled around 2015 as lower oil prices prompted a reassessment of government spending priorities.

DEBT WATCH — USD 1.5 bn Japanese financing for water and energy projects: The National Debt Management Center (NDMC) lined up a USD 1.5 bn, 12-year financing agreement with Japan’s Export Credit Agency (Nexi) to support procurement in the Kingdom’s water and energy sectors, state news agency SPA reported on Thursday.

The financing helps narrow the Kingdom’s financing needs for 2026, following a USD 13 bn (SAR 48.8 bn), seven-year syndicated loan for utility and infrastructure projects NDMC secured in late December. Meanwhile, for Japan, this financing creates a fast lane for Japanese firms and their local JV partners to bid on upcoming desalination, hydrogen, and grid projects in the Kingdom. Nexi’s mandate is to promote Japanese exports.

WEATHER- Scattered rain is expected in western and southwestern regions, while dust and sand storms will affect Hail, Madinah, western Riyadh, and parts of Makkah and Asir, reducing visibility in these areas.

• Riyadh: 23°C high / 12°C low.
• Jeddah: 28°C high / 23°C low.
• Makkah: 28°C high / 23°C low.
• Dammam: 21°C high / 9°C low.

Watch this space

DEFENSE — The Kingdom is leading defense pacts across the region, effectively creating a bulwark against regional violence. A year-old draft defense agreement is near completion between Saudi Arabia, Pakistan, and Turkey — separate from the Saudi-Pakistani mutual defense pact signed last September, Pakistan’s Defense Production Minister Raza Hayat Harraj told Reuters on Wednesday.

Why this matters: A trilateral defense bloc between the three nations would build on their distinctive strengths — Saudi Arabia’s wealth, Pakistan’s nuclear arsenal, and Turkey’s advanced military capabilities — to face an increasingly volatile region. The bloc would aim to provide a regional military umbrella against shared threats — including Israel — as well as challenges specific to each country, such as instability in Yemen for Saudi Arabia, rivalry with India for Pakistan, and Kurdish paramilitary groups for Turkey.

AND- Another defense pact is taking shape with Egypt and Somalia to secure the Red Sea and support the Somali government and the country’s territorial integrity, Bloomberg reported on Friday, citing two unnamed sources it said are familiar with the matter. The pact follows a series of Saudi actions against growing threats of separatism on its southern borders, including a campaign in Yemen that culminated in the UAE-backed Southern Transitional Council’s leader fleeing to the UAE via Somalia. In Somalia, Israel had recognized the separatist region of Somaliland, a move that Saudi Arabia, Egypt, and Somalia jointly denounced.

The Kingdom is not just taking up arms — it’s also extending aid. The Saudi Development and Reconstruction Program for Yemen (SDRPY) is providing a SAR 1.9 bn (USD 500 mn) aid package to Yemen to fund 28 projects and initiatives across the country’s provinces, reaching as far as Socotra island, SDRPY said on X on Thursday. The package includes fuel supplies to boost power generation, as well as the construction of hospitals, schools, and roads, alongside a mosque in Socotra.

MINING — A Saudi-US joint venture wants to process Greenland’s rare earths in the Kingdom and ship 100% of the product to the US. New York-listed Critical Metals Corp. (CRML) and Tariq Abdel Hadi Abdullah Al Qahtani & Brothers Company (TQB) signed a term sheet to build a USD 1.5 bn rare earth processing facility in Saudi Arabia, according to a statement. If cleared, the initial phase of the project is expected to cost around USD 290 mn, with production targeted to start next year.

From Greenland to the US via Saudi Arabia: The facility will process ore from CRML’s Tanbreez mine in Greenland (the latest object of the US’ desire). The JV expects to handle 25% of the mine’s output, producing separated oxides and magnet-grade materials.

The kicker? All output is pre-sold to US customers, specifically for defense and industrial purposes, creating a pipeline for US defense with Saudi square in the middle.

Why it matters: Saudi is emerging as the safe third party in the US-China mineral war. By processing Greenlandic ore in Saudi Arabia for US defense contractors, this facility bypasses China entirely. It validates the thesis that the Kingdom can monetize geopolitical tension by serving as a safe harbor for Western allies. Beyond this single agreement, the Kingdom signed MoUs with Canada, Chile, and Brazil, locking in the Western-standard technical know-how required to make this pivot sustainable.

How it works for the operators: TQB and CRML share the JV 50/50, but CRML retains its stake on a “carried-interest basis,” meaning no immediate CapEx obligation for the US firm. Meanwhile, a jointly governed development committee will oversee engineering, construction, commissioning, and market entry.

MEANWHILE- Saudi EXIM backs Trafigura prepayments: Saudi Export-Import Bank signed a master ins. policy with commodities giant Trafigura Group covering up to SAR 3 bn (USD 800 mn) to support multi-year prepayment facilities for mining companies, Al Arabiya reports. The agreement, signed on the sidelines of the Future Minerals Forum, gives Trafigura Saudi state backing to secure global mineral supplies.

ALSO- Saudi Gold Refinery Company plans to list a 30% stake on the Kingdom’s stock exchange between 2028 and 2030, Chairman Suleiman Al-Othaim said (watch, runtime: 5:05). The company aims to secure proven gold reserves of between 5-10 mn ounces ahead of the offering and is targeting the opening of two new mines each year.

OIL — Aramco locks in US LNG: Aramco signed a long-term agreement with US-based Commonwealth LNG to lift 1 mn tons annually, with an option to double the offtake, Reuters reports, citing three people it says are familiar with the agreement.

Aramco wants to be a major LNG trader, especially in the US, where export capacity is set to nearly double over the next four years. The company is targeting an annual LNG capacity of 20 mn tons for global sales, with 4.5 mn already in progress, CEO Amin Nasser has previously said. Commonwealth joins a growing list of US partners, including NextDecade.

Data point

8.3 mn TEUs — that’s the total number of containers handled at ports overseen by the Saudi Ports Authority (Mawani) in 2025, climbing 10.6% y-o-y from 7.5 mn TEUs in 2024, Mawani said in a statement. Transshipment containers also jumped 11.8% y-o-y to 1.9 mn TEUs during the year. Meanwhile, exported containers rose 11.7% y-o-y to 3.1 mn TEUs, and imports increased 8.8% y-o-y to 3.2 mn TEUs.

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The big story abroad

It’s another morning with Trump dominating global headlines: US President Donald Trump has officially launched a Greenland-focused trade war, announcing yesterday that Washington will slap a 10% tariff on eight European nations — including Denmark, Germany, and the UK — starting 1 February. The levy will increase to 25% on 1 June unless the US secures an agreement for the purchase of Greenland, which Trump means to use as a base for his Golden Dome missile defense project.

Countering the tariff noise, the EU and Mercosur signed a landmark trade agreement yesterday, ending 25 years of negotiations. The agreement eliminates 90% of tariffs between the EU and the South American bloc, a strategic move by Brussels to diversify supply chains for critical minerals and agricultural goods.

China and Canada, meanwhile, ended a trade war and signaled they are deepening their partnership.

WORTH READING THIS MORNING- The war between the White House and the Fed has turned into a legal showdown, as Chair Jay Powell publicly attacked a DOJ probe into his office, calling it a “pretext” for Trump to force interest rate cuts. (Financial Times)