Strong capital buffers and sovereign backing provide a shield for the regional banking sector following recent geopolitical escalations
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The GCC’s banking sector is facing its most significant test in years following the attacks by Israel and the US on Iran, and the subsequent strikes launched by Iran on all six GCC states.
The data so far indicates that the region’s finances are holding firm. “Fitch believes GCC sovereign ratings generally have sufficient headroom to withstand a short regional conflict that does not escalate significantly further, including in most cases substantial assets that provide a buffer against short-term hydrocarbon revenue disruption,” it said in a report on 3 March.
In the UAE, the Central Bank of the UAE (CBUAE) issued a statement on 5 March saying that the nation’s banking and financial sector continues to operate normally. It said the UAE’s banking assets now exceed AED5.42tn ($1.48tn), supported by a capital adequacy ratio of 17% and a liquidity coverage ratio of 146.6%, adding that both figures sit comfortably above international regulatory requirements.
“The UAE’s banking and financial sector continues to maintain very strong levels of capital adequacy and liquidity … reflecting the scale, resilience and strength of financial institutions operating in the country,” said Khaled Mohamed Balama, governor of the CBUAE.
While the immediate financial metrics are sound, the broader operating environment is not without its challenges. Fitch notes that the attacks raise risks to the 2026 baseline, which had previously assumed robust non-oil growth driven by the region’s massive pipeline of diversification projects.
Economic impact
The conflict has already impacted the real economy. Air travel suspensions, a slowdown in consumer activity and shifting risk perceptions regarding tourism could weigh on non-oil GDP if the tension lingers. Fitch highlighted that the key metric to monitor will be the “strength of operating conditions, particularly non-oil growth and general confidence in the region”.
The critical variable remains the duration of the conflict. If hostilities are contained within a month – as is the current expectation among analysts – the impact on GCC economic growth is likely to be temporary.
There are specific regional nuances to watch. While most GCC banks enjoy ample liquidity, those in Qatar and Saudi Arabia have historically faced tighter conditions. “The conflict could make it more challenging for GCC-based entities to issue debt in overseas capital markets. This could particularly increase Saudi banks’ reliance on more expensive domestic markets,” said Fitch.
For now, the strategy from both regulators and ratings agencies is one of cautious optimism. The region’s capital expenditure programmes and diversification drives provide a structural momentum that is difficult to derail in the short term.
Fitch concluded that as long as energy infrastructure remains intact and public spending continues to shore up growth, the GCC’s financial institutions are well-positioned to navigate the crisis.
READ THE MARCH 2026 MEED BUSINESS REVIEW – click here to view PDF
Riyadh urges private sector to take greater role; Chemical players look to spend rationally; Economic uptick lends confidence to Cairo’s reforms.
Distributed to senior decision-makers in the region and around the world, the March 2026 edition of MEED Business Review includes:
