Saudi-UAE tensions, UAE-Iran trade ties, Egypt spreads

Reports that Saudi Arabia has increased monitoring of financial transactions with the UAE appears to be part of growing geopolitical competition between the two countries. The macro impact should be limited, but the UAE-Saudi rivalry could have important consequences in other parts of the region, such as Syria and Lebanon. Meanwhile, the UAE’s decision to curb trade and financial ties with Iran further increases the pressure on the Islamic Republic’s economy, although there’s no guarantee that this will force the regime to make concessions. Finally, Egypt’s dollar bond spreads narrowed this week to their lowest level since 2014 and the improvement in policymaking over the past couple of years should help to keep risk premia contained.