Why the UAE can withstand shocks from escalating Iran–US conflict: 6 reasons

Dubai: A fresh assessment from S&P Global Ratings highlights the structural strengths that help shield the UAE economy from geopolitical shocks.

The agency says the UAE’s large fiscal and external buffers provide space for policy maneuvering during adverse geopolitical developments or unfavorable hydrocarbon sector dynamics, including potential disruptions to oil production or exports.

Here is a breakdown of the factors supporting that economic resilience.

The UAE holds exceptionally large government assets. S&P estimates that the country’s consolidated net asset position will reach about 184% of GDP in 2026, while government liquid assets are calculated at roughly 210% of GDP.

“Our ratings on the UAE remain supported by the government's strong fiscal and external positions,” S&P said. The agency added that the “exceptional strength of the government's consolidated net asset position… provides a significant fiscal, external and economic buffer to external shocks.”

These reserves act as a financial shock absorber if geopolitical tensions disrupt energy markets or global trade.

The UAE maintains relatively limited public debt compared with many advanced economies. S&P estimates general government debt at about 27% of GDP in 2026.

“The UAE’s general government debt is very low,” the agency said. Low borrowing gives policymakers flexibility to increase spending, support the economy, or stabilize markets if external shocks occur.

Government finances have stayed strong in recent years. S&P says the UAE’s budget recorded an average surplus of 5.6% of GDP between 2021 and 2025.

In simple terms, the government earned more revenue than it spent during that period. That financial cushion gives authorities more room to support the economy if geopolitical tensions disrupt markets or trade.

Oil remains a major part of the UAE economy, though it no longer dominates overall economic activity. S&P says non-oil sectors account for about 75% of the country’s GDP, which helps the economy withstand volatility in global markets.

The agency said the size of the non-oil economy strengthens the UAE’s ability to absorb shocks tied to energy markets or geopolitical developments.

Government investments also strengthen financial resilience. S&P said government investments and sovereign wealth funds play an important role in supporting financial stability.

Major UAE government investment funds include Abu Dhabi Investment Authority, Mubadala Investment Company, ADQ, Investment Corporation of Dubai, and Emirates Investment Authority.

These state investment institutions manage global portfolios and generate income beyond the oil sector, adding another layer of financial buffers for the economy.

The UAE banking system has demonstrated strong financial health in recent years. According to the S&P report, the sector has shown “strong resilience and financial soundness over the past few years.”

The agency expects continued expansion in lending activity. “We expect solid loan growth to continue in 2026–2027. This will be supported by ample liquidity in the banking system amid expected monetary policy easing,” S&P said.

Banks are also likely to benefit from the continued expansion of the non-oil economy over the next 12–24 months.

S&P Global Ratings affirmed the UAE’s ‘AA/A-1+’ sovereign credit ratings with a stable outlook, noting that the UAE holds strong financial buffers that allow policymakers to respond if regional tensions disrupt energy markets or trade.

The stable outlook reflects S&P’s view that the UAE’s large fiscal and external buffers should provide space for policy maneuvering during adverse geopolitical developments, including potential disruptions to oil production or exports.