Warnings of hundreds of billions in pressure on Gulf banks as the war escalates

S&P Global Ratings warned that banks in the Gulf Cooperation Council countries may face significant financial pressures if the war in the Middle East continues and escalates, with the possibility of deposits worth about $307 billion being withdrawn.
Estimates indicated that these risks are still potential and have not actually materialized yet, as there have been no significant outflows of funds recorded, whether from local or foreign investors, but the continuation of tension for a longer period may push banks and clients to take precautionary steps, including transferring money to safer havens.

Strong liquidity but under test

On the other hand, the agency clarified that Gulf banks have high liquidity levels, estimated at about $312 billion in cash, in addition to reserves that could reach around $630 billion if some investments are liquidated, which enhances their ability to absorb potential shocks.
It confirmed that the current risks are still "manageable," especially given the strong government support for the banking sector in several Gulf countries, alongside tightened supervision by regulatory authorities since the beginning of the war.

Variation in risk levels

Estimates showed that the degree of exposure to risks varies between countries, where banks that rely more on external financing may be more vulnerable to pressures, especially amid rising levels of external debt.
Conversely, some markets, such as United Arab Emirates, have benefited from increased demand for credit due to continued government spending, particularly in the tourism and infrastructure sectors, which contributed to supporting the stability of the banking sector.

Potential loss scenarios

If conditions worsen, Gulf banks may face cumulative losses of up to about $37 billion if non-performing loans rise significantly to levels higher than usual.

Resilience capacity

Despite these warnings, the agency emphasized that Gulf banks enter this phase from a relatively strong position, benefiting from reforms and measures adopted during previous crises, such as the Coronavirus pandemic, which enhanced their ability to withstand economic shocks.
With the continuation of the war and its entry into a more complex phase, the banking systems in the region remain under close monitoring, with anticipation of developments that may affect regional and global financial stability.