Good morning, friends. As we ease into 2Q 2025, we look back at the first quarter of the year, from capital markets to the property market. On the property front, it’s good news: The market has held up due to a phenomenal start to the year, but on capital markets, it’s less so: Dubai and Abu Dhabi are still seeing foreign outflows, with the two indices ending March in the red.

In other bad news…. The GCC is likely to slip into a war-induced recession this year, with GDP now projected to contract by 0.2%, according to a recent research note from Oxford Economics. The forecast represents a massive 4.6 percentage point downgrade from pre-war estimates as the Iran war enters its second month and reshapes the region's economic outlook.

The UAE is anticipated to bear the brunt of the downturn, as the regional conflict exposes a critical reliance on the Strait of Hormuz, the note explains. The Emirates' limited capacity for rerouting hydrocarbon exports would mean halting production as domestic storage facilities reach capacity. The fallout is also likely to deliver a long-term blow to tourism and domestic demand, with recovery expected to be gradual and closely tied to how the security situation evolves, the note said.

On the ground, attacks continued yesterday, with one fatality in Fujairah of a Bangladeshi national, state news agency Wam reports.

WEATHER- Expect a high of 27°C today and lows of 19-20°C in Dubai and Abu Dhabi, according to our favorite weather app.

Watch this space

WAR — The US is “very close” to ending the war on Iran — that’s the main takeaway from US President Donald Trump’s address early this morning. While we were expecting some grand announcement — a ceasefire agreement or a ground invasion — the speech didn’t provide any of that.

Trump shifted his tone regarding reopening the Strait of Hormuz, downplaying Washington’s role. Instead, he said, the operation should be led by countries that — unlike the US — rely heavily on the strait for oil imports, adding that the waterway will “open up naturally” after the war ends. This runs counter to Trump’s call on NATO allies to help Washington revive traffic in the waterway last month.

Trump also reiterated his timeline of continuing strikes on Iran for the next two to three weeks, threatening to target its energy infrastructure if “there’s no deal.” He also thanked US allies in the region — including the UAE and Saudi Arabia — and vowed that Washington would “not let them get hurt.”

Market reax: Oil and equities tumbled following the speech, which investors hoped would bring news of a de-escalation. Following the speech, Brent crude futures rose 5% to USD 106.42, and Asian markets opened in the red, with Japan’s Nikkei and South Korea’s Kospi looking at steep losses. Wall Street also is looking at a volatile day of trading, with futures down.

AND- In another sign of closer alignment with US policy, some Emirati airlines are refusing to carry Iranian nationals either to or through the UAE. Emirates posted a notice on its site seen by EnterpriseAM UAE earlier to this effect and Bloomberg reports that Flydubai and Etihad will be following suit.

However, there are exemptions, including for Golden Visa holders, bank execs, doctors, engineers, investors, and the children of female UAE nationals or spouses of citizens. The decision to keep the door slightly ajar points to an effort to strike a balance between taking a diplomatic stance while accommodating the 500k Iranian expats living in the Emirates and the UAE’s status as Iran’s second-largest trading partner. The UAE also recently said it was upping scrutiny on Iranian state-linked institutions.

Iranians are welcome, Foreign Ministry says: Contrary to some reports, a statement from the Foreign Ministry affirms the Iranian community’s value to the UAE, dismissing “inaccurate media claims” regarding the residency status of expats, state news agency Wam reports.

INDUSTRY WATCH — Emirates Global Aluminium (EGA) has so far kept quiet about the extent of damage at its Kezad facilities following weekend attacks, but the impact is apparent nonetheless. EGA is reportedly selling large volumes of raw aluminum, Bloomberg reports, citing sources familiar with the matter, with another source telling the news outlet production has stopped at the Al Taweelah facility altogether.

What this might mean: The move suggests its facilities sustained enough damage to make selling and offloading volumes directly, rather than waiting for repairs, the best move. The shipment offers are reportedly running through to June, offering little solace to those hoping the damage would be a quick fix.

ICYMI- As we previously reported, the aluminum market has already felt the impact of the strikes, which also targeted another regional heavyweight, Aluminium Bahrain. Prices increased almost 5% directly afterwards and have continued to climb, according to London Metal Exchange data. A worst-case scenario could see them reach as high as USD 4k per ton, just shy of the USD 4.1k record high that followed Russia’s invasion of Ukraine, and would also cause significant disruption to downstream sectors in auto, construction, and packaging.

DEBT WATCH — Nigeria shops for cheaper money in the UAE: Nigeria is weighing a USD 5 bn total return swap with First Abu Dhabi Bank (FAB) as higher global yields begin to price frontier issuers out of traditional markets, Bloomberg reports, citing a letter from President Bola Tinubu. The agreement is priced at roughly 395-400 bps over SOFR and backed by collateral worth 133% of the loan.

The rationale? If public markets are too expensive, tap Gulf balance sheets instead. The structure is designed to undercut eurobond costs at a time when Nigeria’s 2034s are yielding close to 8%. The terms are “considered competitive relative to prevailing eurobond yields for Nigeria,” according to a Senate committee report, with a six-year tenor, a three-year break clause, and annual rollover provisions.

The UAE is already an active lender in Nigeria: As we previously reported, FAB backed a USD 626 mn slice of the Lagos-Calabar Coastal Highway alongside Afreximbank, while Dubai-based Maser Group is eyeing USD 1.6 bn in investments across the country.

Where it goes: Proceeds would fund roads and ports while refinancing pricier debt, even as Abuja pushes ahead with a 17% expansion in its 2026 budget.

DEFENSE — Ongoing Iranian strikes have already triggered a rethink of the UAE’s defense infrastructure, and it now seems the Emirates has already got the ball rolling, holding talks with US-based and Trump-backed drone firm Powerus about buying weapons systems, Bloomberg reports. The discussions are still early, with no agreement finalized. Such cooperation with a Trump-linked firm wouldn’t be the first, following the reported Emirati stake in World Liberty Financial.

ICYMI- The UAE has faced more than 1k Iranian attacks since the start of the conflict, including 800 drones, and the issue with the current defense system is cost. A single Shahed drone can run as little as USD 20k-100k, while interceptors like Patriot or THAAD can cost USD 3-12 mn per shot.

CAPITAL MARKETS — Brooge takeover lands GulfNav on institutional radars: DFM-listed maritime company Gulf Navigation (GulfNav) joined the S&P UAE BMI Liquid 20/35 Capped Index late last month, according to a bourse filing (pdf). Stronger turnover and liquidity pushed the stock into the index’s eligibility range. The listing allows GulfNav to attract broader investor interest and opens new trading windows for its shares, while serving as a seal of approval for its core fundamentals.

Behind the move: GulfNav’s inclusion comes four months after it acquired Brooge Energy assets in a AED 3.2 bn transaction, which turned the business into an integrated model spanning maritime logistics and energy infrastructure.

The big story abroad

Apart from Trump’s address (which we dive into in the news well, above), space is a big theme on the front pages this morning. Elon Musk’s SpaceX has confidentially filed for an IPO, which could value the firm at above USD 1.75 tn, sources close to the matter told Bloomberg. A confidential filing allows the satellite and AI company to seek feedback from the Securities and Exchange Commission and make changes before any information goes public.

To infinity and beyond: NASA’s first crewed mission to the moon in more than 50 years tookoff yesterday. The Artemis II launched from Florida and will take four astronauts around the side of the moon — the furthest humans have ever traveled from Earth. The move signals that Washington aims to cement its leadership in space exploration amid tough competition from China.

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