After weeks of continued deterioration, foreign relations between Israel and the US appear to have a chance to improve. Although both country’s leaders have escalated their highly publicised feud to historical highs in recent weeks, Monday’s phone call (the first in more than a month) may provide a lifeline for both. Prime Minister Netanyahu has agreed to send a group of advisers to the US to discuss the Rafah offensive and other key aspects of the conflict. Both leaders are in a particularly difficult situation where they must advocate to voters who align on opposite sides of this issue. Anthony Blinken, US Secretary of State, will return to the Middle East to meet with Egyptian, Saudi and Israeli delegates in what will be his sixth trip to the region since 7 October. The call on Monday came after President Joe Biden praised Chuck Schumer’s, majority leader of the US Senate, speech in which he publicly advocated for new elections in Israel. A reconciliation between both nations could significantly increase the flow of aid allowed into the concave and ensure the Rafah offensive prioritises the safety of civilians.
Saudi Vision 2030, Crown Prince Mohammed bin Salman’s trillion-dollar economic transformation project will require a fundamental paradigm shift in spending and funding habits for the world’s second-largest oil producer. The issue lies in the fact that loan growth has outstripped deposits in recent years and oil protectionism (production cuts) is threatening to lead to a deterioration in Saudi Arabia’s fiscal balance. The nation’s fiscal deficit for 2023 reached 2% of GDP and by all accounts it will continue to climb higher as it embarks on more and more capital-intensive projects. The PIF’s cash reserves were reported by Bloomberg to have dropped to USD15bn, the lowest level since 2020, and the fund has expressed its inability to indefinitely rely on the local banking system without comprising domestic liquidity. With spending predicted to reach USD70bn a year after 2025, currently around USD50bn a year, the PIF is looking to become a regular issuer of bonds together with alternatives such as equity offerings. Regular bond issuance will also help establish a benchmark yield curve facilitating future debt sales. Thus far this year, the PIF has issued USD7bn and Saudi Arabia a further USD12bn, a number we expect to climb before the end of 2024.
The public offering of Saudi Arabia’s National Oil Co, the world’s largest oil producer and the fourth biggest company worldwide by market cap, is still underway. The Kingdom is in talks with global powerhouses such as JP Morgan, BofA and Morgan Stanley to underwrite the transaction. The deal has been in the works for months and the timeline remains unclear. The last offering by the Kingdom was back in 2022 when PIF sold a USD3.2bn stake in Saudi Telecom Co. This secondary offering would come four years after Saudi Arabia raised USD30bn in Aramco’s IPO, in what was the world’s largest ever stock sale.
Israel’s CPI forecasts for March will be released on Tuesday, Dubai and Oman’s CPI on Friday, and Bahrain’s CPI next Monday. GDP constant prices for Qatar and Bahrain will be released next Monday together with Qatar’s trade balance. Finally, Saudi Arabia’s trade oil export data and Israel’s manufacturing production will print next Tuesday.