The Middle East’s inflation rate for November 2025 registered at 4.80% year-over-year, slightly below the 5.00% market estimate and down from 4.90% in October, according to the Sigmanomics database. This figure reflects a moderate deceleration after inflation accelerated from 2.10% in January 2025. The region continues to grapple with inflationary pressures driven by energy costs, food prices, and supply chain disruptions.

Drivers this month

• Energy prices contributed approximately 0.25 percentage points to inflation, reflecting ongoing volatility in oil markets.
• Food inflation remained elevated, adding 0.18 percentage points, driven by supply constraints and import costs.
• Housing and transportation costs showed minor easing, subtracting 0.05 percentage points.

Policy pulse

Inflation remains above the central banks’ typical 3% target range, prompting cautious monetary policy stances. Several regional central banks have maintained or slightly increased policy rates to anchor inflation expectations.

Market lens

Immediate reaction: The regional currency basket weakened by 0.30% against the euro in the first hour post-release, while 2-year government bond yields rose by 5 basis points, signaling cautious market sentiment.

Core macroeconomic indicators provide context for the inflation reading. The Middle East’s GDP growth is projected at 3.20% for 2025, supported by oil export revenues and gradual diversification efforts. Unemployment rates hover around 7%, with labor market slack limiting wage-driven inflation. The regional Purchasing Managers’ Index (PMI) averaged 52.40 in Q3 2025, indicating modest expansion.

Monetary Policy & Financial Conditions

Central banks in the region have adopted a cautious tightening approach. Policy rates average 4.50%, up 50 basis points since early 2025. Liquidity conditions remain moderately tight, with credit growth slowing to 6% YoY. Inflation expectations have stabilized near 4.50%, reflecting confidence in monetary frameworks.

Fiscal Policy & Government Budget

Fiscal deficits have narrowed to 2.80% of GDP, aided by higher oil revenues and controlled public spending. Governments continue targeted subsidies to shield vulnerable populations from inflation shocks, though these measures risk fiscal strain if inflation persists.

Drivers this month

• Energy prices: 0.25 pp (down from 0.30 pp in October)
• Food inflation: 0.18 pp (steady)
• Housing & transportation: -0.05 pp (improvement)

Policy pulse

Inflation remains above target, but the deceleration signals that monetary tightening is beginning to take effect. Central banks face a delicate balance between curbing inflation and supporting growth.

Market lens

Immediate reaction: Regional bond yields rose modestly, with the 2-year yield increasing by 5 basis points. The regional currency basket weakened 0.30% versus the euro, reflecting cautious investor sentiment amid inflation uncertainty.

Looking ahead, inflation in the Middle East faces a complex mix of risks and opportunities. The baseline scenario projects inflation stabilizing near 4.50% through mid-2026, supported by continued monetary tightening and easing supply bottlenecks.

Bullish scenario (20% probability)

• Global energy prices decline sharply due to easing geopolitical tensions.
• Supply chains normalize faster than expected, reducing food inflation.
• Monetary policy remains effective, anchoring inflation near 3% target.

Base scenario (60% probability)

• Inflation holds steady around 4.50%, with moderate volatility in energy and food prices.
• Monetary and fiscal policies maintain balance, avoiding recession risks.
• Gradual improvement in supply chains and labor markets.

Bearish scenario (20% probability)

• Geopolitical shocks disrupt energy supplies, pushing prices higher.
• Food inflation spikes due to adverse weather or trade restrictions.
• Monetary tightening triggers growth slowdown, complicating policy responses.

In conclusion, the Middle East’s inflation rate of 4.80% YoY in November 2025 signals a tentative easing after months of acceleration. While monetary and fiscal policies are beginning to show impact, external shocks and structural challenges remain key risks. Market participants should monitor energy markets, geopolitical developments, and policy signals closely. The inflation outlook is balanced but tilted slightly toward persistent elevated inflation given ongoing supply constraints and geopolitical uncertainties.

Key Markets Likely to React to Inflation Rate YoY

The inflation rate in the Middle East significantly influences regional financial markets, particularly energy-linked equities, currency pairs, and sovereign bonds. Traders and investors should watch the following symbols for correlated price movements:

• ARAMCO – Saudi Arabia’s oil giant, sensitive to inflation-driven energy price shifts.
• USDEUR – Euro to US dollar, reflecting currency volatility linked to inflation and monetary policy.
• BTCUSD – Bitcoin, often viewed as an inflation hedge and risk sentiment barometer.
• DFMG – Dubai Financial Market General Index, sensitive to regional economic conditions.
• AEDUSD – UAE dirham to US dollar, reflecting regional currency stability amid inflation.

FAQ

What is the current inflation rate YoY for the Middle East?

The latest inflation rate for the Middle East is 4.80% year-over-year as of November 2025.

How does the inflation rate affect monetary policy in the Middle East?

Elevated inflation above central bank targets prompts cautious interest rate hikes to stabilize prices without harming growth.

What external factors influence Middle East inflation?

Energy price volatility, geopolitical tensions, and global supply chain disruptions are key external drivers of inflation in the region.

Takeaway: The Middle East’s inflation rate shows signs of plateauing but remains elevated, requiring vigilant policy and market monitoring amid persistent external risks.