Rising geopolitical tension may be rattling markets, but banks across the Gulf appear to be holding their ground. Analysts say institutions in Saudi Arabia and the United Arab Emirates remain well-positioned, with solid fundamentals cushioning them against external shocks.
According to a recent assessment, even if discount rates climb by one percentage point, valuation targets across major Gulf markets would likely slip by only about 5–9%. That limited downside reflects strong capital buffers and robust deposit bases — factors expected to drive investors toward larger, more stable lenders during periods of uncertainty.
Within Saudi Arabia, lenders such as SBN, SABB, and Al Rajhi Bank are seen as leading contenders. In the UAE, ADCB and Emirates NBD stand out for their balance-sheet strength and market positioning. Analysts view these institutions as better equipped to navigate volatility while still offering upside potential.
Interest rate dynamics could also provide short-term support. Delayed rate cuts are keeping lending yields elevated, boosting net interest margins. However, this advantage is partly offset by elevated funding costs and slower credit growth, which continue to weigh on momentum.
Not all markets are viewed equally. Banks in Kuwait face a more cautious outlook due to the country’s heavy dependence on the Strait of Hormuz for oil exports — a vulnerability if regional disruptions intensify.
Earnings across Gulf banks are projected to remain broadly stable in the first quarter of 2026, with Saudi lenders expected to lead the pack. Yet the broader outlook isn’t immune to geopolitical risk. A three-month disruption tied to regional conflict could shave roughly 7% off oil-driven GDP, with Kuwait and Qatar seen as the most exposed.
For now, though, the message from analysts is clear: despite mounting tension, Gulf banks are entering the uncertainty from a position of strength — steady, well-capitalised, and built to weather turbulence. 📊🌍💼
