Daily Economic Update

US-China: Trump requests to delay his upcoming China visit citing the Middle East war; Malaysia declares trade deal with the US “null and void”. President Trump requested to delay his visit to China, originally scheduled to take place at the end of the month, by “a month or so” because of the war in the Middle East as he needed to be in Washington. Earlier, the possibility of delaying that visit was framed as a threat by Trump to push the Chinese to help in unblocking the Strait of Hormuz. Recent comments by Treasury Secretary Bessent and Trump himself have downplayed that threat, stressing that the delay of the visit is solely because Trump ought to be in Washington given the ongoing war. In all cases, the postponement of that summit, which was supposed to take place at the end of March, is a signal that the war may carry on beyond that date, dimming hopes that some sort of resolution can be reached by then. Separately, Malaysia stated that its previously signed trade agreement with the US (which put 19% tariffs on most imports from Malaysia) has become “null and void” following the US Supreme Court ruling, criticizing the US’s re-imposition of blanket tariffs. The Trump administration had imposed 10% (later supposedly increased to 15%) baseline tariffs on all countries following the US Supreme Court verdict of rendering reciprocal tariffs invalid. Malaysia’s cancellation of the deal shows that the court setback has somehow undermined Trump’s leverage of using tariffs in extracting favorable trade and non-trade terms. Meanwhile, in data news, US industrial production in February rose by 0.2% m/m (1.4% y/y) after an increase of 0.7% (2.3% y/y) in January, marking a positive m/m growth for the fourth straight month.    

Oil: Iran strikes oil and gas fields overnight, reversing Monday’s oil price retreat. Overnight attacks by Iran on regional energy infrastructure, specifically the Shah gas field in the UAE (see more below) and the Majnoon oil field in Iraq, has pushed oil prices back up this morning in Asian markets after Monday’s retreat. Brent was trading around $104/bbl at the time of writing, up almost 4% on yesterday’s close at $100.2/bbl (-2.8% d/d). The strikes, as the first confirmed attacks on upstream oil and gas production assets in the region since the conflict began, mark a more serious escalation in hostilities; previous attacks had targeted refineries, export terminals and storage infrastructure. Direct attacks on oil and gas production assets could delay the restoration of supply even if tanker traffic through the Strait of Hormuz resumes, potentially tightening global oil markets further. Yesterday’s fall in oil prices was spurred by reports that some tankers had been allowed safe passage through the Strait and after the IEA suggested that the volume of SPR releases could increase. The vessels transiting the Strait yesterday were one Pakistan-bound crude oil tanker—the first non-Iranian vessel to transit while broadcasting its Automatic Identification System, according to Kpler—and two India-bound LPG-carrying tankers. The two India-bound cargoes were reportedly allowed to pass by Iran in exchange for the release of three Iranian oil tankers that India had seized in February, though the Indian side denied any such exchange agreement. US Treasury Secretary Scott Bessent seemed to back this up when he stated that some Indian and Chinese fuel tankers had successfully crossed the waterway.

UAE: Conflict disrupts domestic energy output. According to reports from Reuters, the effective closure of the Strait of Hormuz forced Abu Dhabi National Oil Company (ADNOC) to implement widespread production shut ins, cutting the country’s daily crude output by more than half from pre conflict levels of nearly 3.4 mb/d. Reuters also reported that both onshore and offshore production have been affected, with offshore output reportedly fully halted. The port of Fujairah, a critical storage and exit point for around 1 mb/d of Murban crude, has been operating intermittently in recent days, as repeated drone attacks have forced multiple oil loading operation suspensions. Disruptions have extended beyond oil, with operations at the Shah gas field, one of the world’s largest sour gas facilities, remaining suspended following a separate drone strike. The operational disruptions in the offshore fields and oil production cuts pose challenges on the exporting and logistics fronts and weigh on fiscal revenues. However, the country’s strong fiscal buffers and a diversified economic base provide an important mitigating factor.

Egypt: Portfolio outflows ease as FX buffers strengthen. Pressure on carry trade outflows showed some signs of easing at the start of the week, offering some relief to local debt and currency markets. Foreign investors recorded net sales of around $120 million in Egyptian sovereign debt in the secondary market on Monday, one of the lowest daily outflows since the start of the recent geopolitical escalation, signaling a moderation in the pace of capital withdrawals. At the same time, the Central Bank of Egypt’s net foreign assets rose by 4% m/m to $15.6 billion in February, up from $15 billion in January. This improvement strengthens the banking sector’s external position and provides a solid buffer to absorb short term volatility. Since the onset of the conflict, cumulative foreign outflows from Egypt’s local debt market have reached approximately $6.7 billion amid a broader risk-off sentiment toward many emerging markets. However, the recent slowdown in outflows has helped stabilize the Egyptian pound. Overall, the combination of easing capital outflows and improving FX buffers suggests that the CBE retains sufficient firepower to maintain financial stability, even if external pressures persist.
 

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