The OPEC+ agreement earlier this month to increase oil supply will mean that downturns in hydrocarbon sectors across the Gulf will start to ease. And, of course, the Gulf countries will also benefit from higher prices – Brent crude broke through $50pb this month and we expect it to reach $60pb by the end of next year. This will help to rein in large budget and current account deficits and, in turn, ease any lingering strains on dollar pegs. Fiscal policy is likely to remain tight across much of the Gulf, but further aggressive austerity measures are unlikely. A key risk is that the growing acrimony among OPEC+ members escalates and the agreement falls apart, triggering another oil price war similar to that witnessed earlier this year.
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