IslamicMacro Highlights for October 5 and 9
Turkiye and Egypt’s inflation data will be the main domestic macro releases this week, but we think oil and regional security will remain the bigger market drivers.
Bottom Line Up Front (BLUF): Turkiye and Egypt’s inflation data will be the main domestic macro releases this week, but we think oil and regional security will remain the bigger market drivers. We expect Brent to stay above USD 100 as long as tensions with Iran remain high, while the Jeddah talks between Saudi Arabia, Türkiye and Pakistan could offer some clues on the direction of regional security and shipping risks in the region.
Turkiye’s September inflation will be released on October 5: We expect headline CPI inflation to ease to around 30.0% y/y, from 31.5% in August, although monthly price pressures are likely to remain elevated. We will look at how high services inflation, currency pressures and rising energy costs are affecting the headline inflation reading.
Egypt’s September inflation will be released on October 10: We expect headline inflation to ease to around 14.0% y/y, from 14.5% in August. We think the moderation should be supported by softer food-price pressures, although higher transport and utility costs are likely to keep inflationary pressures relatively high. We will also watch for any renewed pressure from recent increases in administered prices.
Oil and the Strait of Hormuz remain the focus for Islamic economies: Brent remains above USD 100 per barrel, widening the gap between oil exporters such as Saudi Arabia and the UAE and energy importers including Turkiye, Pakistan, Egypt, Malaysia and Indonesia. OPEC+ decided on October 4 to keep November production targets unchanged, while oil supply remains affected by the regional conflict.
We assess further disruption around the Strait of Hormuz would add to inflation and currency pressures across the region. We expect brent oil price to stay over USD 100 this week if no major softening between the U.S. and Iran. (Note: Iranian authorities have recently stated that the Strait will remain closed until their seven conditions are satisfied signals that the truce is unlikely in the near term).
Saudi Arabia, Turkiye and Pakistan are expected to hold a second round of talks in Jeddah this week under the Makkah Agreement: The talks are likely to focus on the latest regional security developments, including the Houthi threat and attacks affecting Saudi Arabia and shipping routes. We expect mentioned countries to discuss Pakistan’s proposal for a political engagement with the Houthis.
For markets, we will be watching whether the talks produce any concrete steps to reduce the risk of further attacks on Saudi infrastructure and regional shipping. We foresee any further escalation around the Red Sea, Bab el-Mandeb or the Strait of Hormuz would remain a key upside risk for oil prices and regional inflation.
Disclaimer: This publication is provided for general informational and macroeconomic research purposes only. It does not constitute individualized investment, financial, legal, tax or other professional advice. Forecasts, opinions and analysis reflect the author’s professional judgment at the time of publication and are not guarantees of future outcomes. See our full Risk & Legal Disclaimer and Terms & Conditions.
Analyst / Author Declaration: I, Volkan Sezgin, Independent Analyst and Researcher, declare that the views and conclusions expressed in this publication reflect my professional judgment at the time of publication and are presented in good faith. The analysis has been prepared independently and without improper influence or inducement. Where applicable, material conflicts of interest are disclosed. I observe applicable professional and internal compliance standards concerning confidentiality, independence and the responsible use of information.