Week three: A “Great Rerouting” is reshaping Gulf logistics as the economic costs pile up

Good morning, wonderful people. We’re well into week three of the US-Israeli war on Iran, and some patterns worth talking about are taking shape.

But first: Let’s play a little game of point-counterpoint.

POINT- The US-Israeli war on Iran could hit MENA’s biggest economies harder than covid if it lasts much longer, Bloomberg ’s inimitable Farouk Soussa says. Qatar and Kuwait could see their economies contract as much as 14% this year if the war lasts through April, while the UAE could see a 4% drop and Saudi GDP could shrink 3%. Egypt, meanwhile, trails only Pakistan and India in its vulnerability to fallout from the conflict, a Fitch Solutions report suggests.

COUNTERPOINT- Maybe some investors think it’s all just a blip? The UAE just raised USD 300 mn in its first AED-denominated T-bond auction since the war started. Investors placed bids for more than 4.4x than was on offer and the spread was just 16 basis points above comparable US treasuries. Some investors, it seems, still like the UAE’s longer-term prospects, whatever the short-term narrative is on capital flight.

Yes, but… The open question remains: How much of the buying was by captive domestic players? (Read: Local institutions directed to send the right signal.)

This morning’s pattern: A Great Rerouting is reshaping the region’s logistics architecture in real time. As we note in this morning’s The Lede, Saudi has engineered a massive repositioning of trucks and customs infrastructure to the Red Sea in a bid to stay open to global trade. Egypt’s Red Sea ports are surging, and DP World anticipates surging Jeddah volumes. Meanwhile, Adnoc is cutting onshore crude shipments to equity partners by 20% so that it can redirect supply to Fujairah, the east-west pipeline that’s now ramping-up to 7 mn bbl / day.

The rerouting will hit passengers this morning, too: DXB was just reopening for a handful of flights as of 10:37 am UAE after an Iranian drone hit fuel tanks at the airport overnight, forcing a shutdown.

What you’re reading: This is the first live-written zero issue of EnterpriseAM MENA+. Thanks for reading. –Patrick