More economic pressure on Bahrain

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OPENING NOTE

The soundtrack of the morning: booms and public safety alerts

Good morning, wonderful people. It’s our last issue before we slide into Eid El Fitr, and the soundtrack to this morning’s issue is courtesy Baby Ayatollah in Tehran, with two booms and two public safety alerts before sunrise. (At least the pre-9am alerts are now a bit less shrill than before…)

We have zero clarity on how much longer the war might last as this third week hurtles to a close, but regional markets are showing signs traders think we’ll be at it for a while yet. We’re hoping for a bit of respite over this long weekend.

Happy Eid, everyone. Monday is a national holiday in Saudi Arabia and Egypt — though not for those of us in the UAE. We’ll be back in your inboxes on Wednesday, 25 March. –Patrick and Salma

On the ropes

Bahrain’s economy was on the ropes before the war with Iran broke out. Three weeks of Iranian attacks may now have it down for the count.

The conflict with Iran has added a layer of economic pressure that Bahrain could have done without. The US-Israeli war on Iran spiked the regional risk premium and drove up the cost of Bahrain’s already-expensive borrowing. Bahrain is also grappling with the disruption to the Red Sea trade flows that the country’s financial services and logistics sectors depend on, threatening to further destabilize an economy that is already heavily dependent on bailouts from its Gulf neighbors.

IN CONTEXT- In the months leading up to the war, both Fitch and S&P downgraded Bahrain’s sovereign credit ratings further into junk territory as government debt hit nearly 150% of GDP. That figure gives Bahrain the undesirable superlative of the second-highest debt-to-GDP ratio of any Fitch-rated sovereign, while debt servicing costs are similarly among the highest globally at 34% of government revenue.

They tried… Manama kicked off a fiscal consolidation package in December that includes introducing a 10% corporate tax in 2027, hiking energy prices for businesses, and implementing spending cuts. The war may have just cut the legs out from beneath the program.

Even with soaring prices, Bahrain’s fiscal breakeven oil price remains out of reach at around USD 127 / bbl. More importantly, the kingdom faces a structural irony: While hydrocarbons account for c. 75% of government revenue, the bulk of its oil income flows from the Abu Saafa offshore field, an asset whose production proceeds Riyadh shares equally with Manama under a decades-old arrangement. In other words, Bahrain can’t pump its way to solvency.

What to watch for: With reforms likely delayed by the war, it’s likely other GCC countries will be forced to extend another bailout package to prop up Bahrain. A destabilized Bahrain is a strategic liability for its neighbors — particularly Saudi Arabia — but the bailout will come with strings: Manama will have to show it’s serious about fiscal reform. Ratings agencies will be watching for any backsliding on the corporate income tax, legislation for which is due to reach parliament this year. Slippage in the timeline will be seen as a signal that the reform package is political theater, not fiscal medicine.

A new automotive playbook

Egypt is pitching itself as a manufacturing hub for Asian automakers — specifically from China, India, and Japan — who are looking to secure their reach into EMEA markets while global supply chains remain under pressure. The positioning comes as the Industry Ministry rolls out a new policy direction for its local automotive industry that reimagines its original Automotive Industry Development Program (AIDP).

What to expect: The ministry’s new plan targets 100k vehicles annually with 60% local content, a government official tells EnterpriseAM. The incentives extend to passenger cars, buses and mass transit vehicles. While the Madbouly government is promising a lucrative revamp, the details are still under wraps.

It’s a clear reboot to a program that failed: The AIDP asked for way too much, way too fast. It demanded assemblers pump out 10k vehicles a year (with a minimum of 5k per model) with a 35% local content ratio, which could only be met by the largest of automakers and didn’t make financial sense for many given weak domestic purchasing power and a small auto feeder industry, sources in the industry tell us.

The revised policy is a signal that Egypt is going after its own competitive niche. Local commentary has for years centered on “catching up” with Morocco, which established itself as a world-class automotive hub with two decades of consistent industrial policy. Having attracted French auto majors, Morocco now manufactures (rather than just assembles) cars at scale and exports around 75% of its output.

The gap between Cairo's aspirations and Rabat’s reality is significant, but the competitive landscape in North African automotive manufacturing is not a zero-sum game. Morocco has already captured the European export tier and is unlikely to cede that position in the near term. Egypt is better positioned to capture Asian manufacturer investment oriented toward domestic consumption in Africa and the Middle East. Egypt’s competitive proposition is built around scale — 107 mn consumers, the Arab world’s largest domestic automotive market, and a web of trade agreements spanning Africa, the Gulf, and the EU that could make it a multi-directional export platform rather than a single-axis one.

Changing tactics?

Gulf states are reportedly urging Washington to “not stop short” in its military campaign against Iran, fearing repeat future attacks if Tehran’s offensive capabilities remain intact, Reuters reports. It remains unclear, however, what the Gulf’s involvement in the war could look like, or if it will get involved at all, as Iran continues to escalate its attacks on the region.

“Gulf states are not at the moment suggesting any inclination towards joining the war because the economic and reputational costs of it would be too immense,” Amandeep Ahuja, head of research at Confluence Consultants, tells EnterpriseAM. The UAE could be involved in a US-led effort to secure the Strait of Hormuz, the UAE president’s diplomatic advisor Anwar Gargash said, as the closure continues to undercut a key pillar of GCC economies.

The thresholds that would prompt the GCC to get actively involved are “if very critical assets, like desalination plants, are under increased attack, or incidents involving civilian casualties, because Gulf states have positioned themselves as a safe haven,” Ahuja said.

Military options on the table

Gulf countries have several different military options, including granting the US full access to bases and airspace, Senior Fellow for Middle East Policy Hasan Alhasan wrote in a note. While the UAE has avoided any participation in the war, Saudi Arabia has acknowledged providing logistical support for US air patrols. The GCC could also engage in more active and direct retaliation, or target the Islamic Revolutionary Guard Corps’ economic, logistical, or energy infrastructure, the report noted.

It’s “unclear whether [the UAE and Saudi] possess sufficient inventories of weapons and munitions to sustain an extended military campaign against Iran,” Alhasan noted. For now, GCC states will likely support through continued information sharing, Nicholas Heras, senior analyst at the New Lines Institute for Strategy and Policy, tells EnterpriseAM.

The future of US-Gulf relations

While at an economic level, the US-GCC relationship remains deep and mutually beneficial, the war could prompt strategic realignment among regional leaders when it comes to relationships with the US and Israel, Ahuja noted.

Heras argues that definitive US military success in Iran “would be a soothing balm for US-Gulf relations,” serving to reassure GCC states of Washington’s reliability.

Can we get our oil out, at least?

Meanwhile, oil prices are cooling off slightly as one Pakistani tanker made it through Hormuz and Iraq is about to tap an alternative exit for crude flows. Baghdad reached an agreement with Kurdish authorities to ship oil out of the country through Turkey’s Ceyhan port, and is still in talks with Tehran to let some Iraqi tankers pass through the strait after attacks on tankers in Iraqi waters. The breakthrough — as small as it is — comes after a Pakistani oil tanker inched its way through the Strait of Hormuz on Monday.

Also on our radar:

Another tanker was hit off the coast of the UAE east of Fujairah while anchored, resulting in minor structural damage, but no injuries. The latest hit marks the third vessel hit in UAE waters in less than a week.
Dubai and Oman Customs introduced a temporary joint corridor to expedite procedures for sea and air cargo, rerouting shipments through Omani ports and airports, according to a statement (pdf).

DFM flirts with the bears

The DFM briefly entered bear market territory on Monday, touching levels roughly 22% below its February peak before closing down 2.53% at c. 5.3k points as week three of the war in Iran grinds on.

The market gained 4.1% yesterday, leaving it down 9% year-to-date.

Real estate stocks — the index's heaviest weight and most conflict-exposed sector — have shed some 31% since the war began, dragging financials and transport with them. The pullback is a sharp reversal for an exchange that rallied c. 300% over six years on the back of Dubai's tourism, property, and financial services boom.

DFM is the worst-hit bourse in the region: The ADX is down c. 9.5% since the war started, while Tadawul has actually rallied more than 2%. “The decline appears to be less about panic selling and more about markets adjusting to higher short-term risk and slower activity in sectors that are central to Dubai's economy,” Christy Achkar, financial market analyst at CFI Dubai, tells us.

SIGN OF THE TIMES- Does Sumitomo Mitsui have the war yips? That’s the suggestion from Bloomberg, which notes that SMBC has taken the “unusual step” of asking Asian banks backing a USD 1.5 bn loan to Saudi Energy to confirm that they’re still on board. SMBC is sole underwriter on the facility, commitments for which are due by the end of this month.

Deals

India is reportedly shelving its sale of a majority stake in state-owned IDBI Bank, putting Emirates NBD’s biggest subcontinent play on ice and causing IDBI shares to drop as much as 16.5%, Reuters reports. The Dubai lender was competing against Canada’s Fairfax for a 60.7% slice valued north of USD 7.5 bn, but bids fell short of New Delhi’s expectations. Foreign appetite for Indian banking assets isn’t the problem — the government thinks both ENBD and Prem Watsa made low-ball offers, leaving Emirates NBD to bide its time on what would have been a landmark cross-border acquisition.

IHC greenlit another AED 5 bn share buyback, just three months after wrapping its previous buyback program and signaling it was done with repurchases, according to a bourse filing (pdf). The program covers c. 0.6% of total shares, with a two-year execution window. IHC could reduce its capital if the repurchased equity isn’t offloaded. It’s a simple message: IHC thinks its share is undervalued and wants to signal confidence even after the recent war-induced market plunge.

LVP Pharma has nearly doubled its stake in EGX-listed Rameda to 23.15%, acquiring 223 mn shares at c. EGP 5.1 apiece in a deal worth EGP 1.14 bn, according to a bourse filing (pdf). It’s the firm’s third major move on Rameda in just over a month. The roll-up comes as Egypt’s pharma sector faces rising pressure from higher import costs tied to the weaker EGP and shipping disruptions — production costs could climb as much as 30% over the next three months if FX pressures persist, the head of the pharma division at the Egyptian Chambers of Commerce told EnterpriseAM earlier this month.

Also worth knowing today-

Egypt is gearing up for a post-Eid privatization sprint, targeting USD 3-4 bn in inflows by year-end from at least 20 state-owned enterprise exits or IPOs — with the government favoring 10-40% public listings on the EGX over strategic sales, EnterpriseAM Egypt reports.

Amanat subsidiary Cambridge Health Group bought out remaining minority investors to take full ownership of Jeddah-based Sukoon International Holding, completing a decade-long consolidation that began with a 33.3% stake in 2015, according to a DFM disclosure (pdf). Transaction value undisclosed.

Cairo-based Hassan Allam’s SPAC has rebranded as Grova Venture Capital per an EGX disclosure (pdf), raising authorized capital to EGP 500 mn with funds earmarked to finance acquisitions and inject liquidity into targets, per a separate filing (pdf).

Market Snapshot

Tadawul -0.3% • ADX +0.8% • DFM flat • EGX30 +1.2%

Brent USD 74.10 / bbl • Gold USD 2,038 / oz • USD / SAR 3.7502 • USD / EGP 50.85

Vulture investor, indeed

Aviation

From the Dept. of Vultures: Lufthansa’s CEO expects the war to undermine Gulf carriers’ dominance on Asian routes, saying “new risks” in the Gulf will weaken Emirates’ case for more landing slots at German airports. He also suggested the war could divert air traffic away from the region long-term.

MEANWHILE-

Kuwait’s Jazeera Airways is launching daily Istanbul flights via Saudi’s Qaisumah Airport starting Wednesday — making it the only carrier currently using the alternative route to bypass disrupted corridors
British Airways has extended schedule reductions for Dubai, Amman, and Bahrain through 31 May and Doha through end of April
Qatar Airways will operate limited flights to and from Doha from today through 28 March.

Logistics

Aramex is expanding its healthcare logistics footprint with a new 5.6k sqm hub in Dubai South Freezone with climate-controlled storage across the temperature spectrum.

Cancelled…

The Qatar Football Festival, including the Spain-Argentina Finalissima, has beencanceled. It’s the latest in a string of regional sports cancellations, including Grand Prix races originally scheduled for April in Qatar, Bahrain, and Saudi Arabia.

Earnings

Majid Al Futtaim posted a 41% jump in net income to AED 3.6 bn on revenue of AED 35.9 bn in 2025, per its earnings release. Strip out valuation gains and underlying net income rose even faster, up 48% to AED 2.3 bn. Real estate development did the heavy lifting, with revenue up 33% to AED 5.8 bn, while e-commerce rose 20% to AED 3.2 bn, and malls held firm with >98% occupancy

What we’re keeping an eye on as we head into the break

We send you off into Eid vacation no clearer about when the war might end than when the week started, but from Abu Dhabi to Cairo, there’s a sense that we’re all going to need to come back from the break ready for this to grind on a while longer. Among the stories we’ll be keeping an eye on over the break:

#1- Saudi construction contracts last year collapsed to less than half of 2024 levels — and PIF budget cuts are only part of the story, industry data suggests. The value of construction contracts issued across the kingdom in 2025 fell below USD 30 bn, less than half the prior year's total. The contraction was driven by Public Investment Fund budget cuts and a wholesale reprioritization of the gigaproject portfolio. The question now: Will the war give Riyadh further cover to pull back even more, prioritizing the World Cup and Expo buildouts over other projects?

#2- Egypt, Jordan, Lebanon, and Tunisia are among the emerging markets in the region that could be getting a financial lifeline from EBRD. The development bank is looking at emergency support measures to help shield vulnerable countries from the external shock of the ongoing regional war.

All four are particularly vulnerable: Egypt and Jordan could be facing a drop in remittances from expats in the Gulf, while both countries and Lebanon are also expected to see disruptions in tourism-based businesses. Meanwhile, a handful of other countries — including Tunisia — are exposed to being delayed, canceled, or otherwise face hurdles as a result of higher financing and energy costs.

#3- It’s interest rate week around the world: The Fed will make its interest rate announcement today — and Thursday is equally big a day, with the ECB, Bank of England, and Bank of Japan doing the same. Central banks in China, Canada, Australia, Brazil, Sweden, and Switzerland are also meeting this week to set rates.

The Fed is widely expected to keep rates unchanged as it takes stock of the economic fallout from the war. Policy decisions moving forward might prove tricky. The war’s pressure on oil prices threatens to spike inflation, while the US labor market is also looking weak, so the case for looser vs. tighter economic policy might be much less clear than before.

Sign of the times

European defense startups could be the Gulf’s best bet for cost-effective drone interception — and the match works both ways. The UAE alone has burned through hundreds of Patriot interceptors since the war began, each costing USD 4 mn to down a USD 35k Iranian Shahed drone. With a global missile shortage compounding the cost asymmetry, Gulf buyers are hunting for alternatives — and cash-strapped European defense startups building next-gen counter-drone systems need exactly what the Gulf offers: urgency, funding, and a live theater to prove their tech.

Regional leaders are increasingly diversifying their weapons arsenals, supplementing US hardware with technology from Europe, South Korea, China, Turkey, and Russia, Nicholas Heras, senior analyst and program head for the State Resilience and Fragility Program at the New Lines Institute for Strategy and Policy, tells EnterpriseAM. But top-tier US hardware will always be at the head of the region’s shopping list, he adds.

CALENDAR

April 2026

10 Apr — Central Bank of UAE policy rate decision. UAE

12 Apr — Central Bank of Egypt monetary policy decision. Egypt

13 Apr — LEAP 2026 conference opens, Riyadh (through 16 Apr). Saudi Arabia

13 Apr — IMF / World Bank spring meetings begin (through 18 Apr). Washington/Virtual

14 Apr — QNB 1Q 2026 earnings guidance. Qatar

15 Apr — 2Q IPO listing window opens; DIP prospectus expected. UAE

18 Apr — Kuwait Stock Exchange sector rebalancing effective. Kuwait

20 Apr — GCC Supreme Council economic session (dates pending confirmation). Saudi Arabia

22 Apr — Saudi Aramco ex-dividend date. Saudi Arabia

30 Apr — OPEC+ ministerial meeting, June production decisions. Vienna/Virtual

May 2026

3 May — SAMA 1Q 2026 inflation report. Saudi Arabia

5 May — Central Bank of Egypt 1Q 2026 monetary policy outlook. Egypt

8 May — Qatar Central Bank 1Q 2026 financial stability review. Qatar

10 May — Tadawul 1Q 2026 market review and foreign investor activity report. Saudi Arabia

12 May — Emirates Global Aluminium IPO window opens (pending). UAE

15 May — Emirates NBD 1Q 2026 earnings. UAE

18 May — First Abu Dhabi Bank 1Q 2026 results. UAE

20–22 May — Arab League economic cooperation session, Cairo. Egypt

22 May — Central Bank of UAE policy rate decision. UAE

25 May — ADNOC Drilling 1Q 2026 results. UAE

28 May — QNB 1Q 2026 results. Qatar

29 May — Saudi Telecom Company 1Q 2026 earnings. Saudi Arabia

31 May — Regional central banks publish Ramadan financial impact assessments. Region-wide

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