S&P Global Ratings gave the UAE a vote of confidence by affirming its AA/A-1+ sovereign credit rating both on the federal level and for Abu Dhabi, with a stable outlook. The agency noted that the country’s massive fiscal and external reserves act as a critical shock absorber, even as Iranian military actions are expected to dampen short-term growth.

These reserves will provide the necessary “policy maneuvering during adverse geopolitical developments or unfavorable hydrocarbon sector dynamics, including disruption in oil production or exports,” the report stated.

The agency did, however, slash its growth forecast for the year to 2.2% for both the UAE and Abu Dhabi. This is down from 5.3% growth last year for Abu Dhabi, and from a previous forecast of 4.7% growth for the UAE this year. The current account surplus is also expected to narrow to 8% from about 11% in 2025.

Despite the volatility, the oil sector remains a pillar of stability, with production forecast to average 3.3 mn bbl / d through 2027, up from 3.14 mn bbl / d in 2025 — providing a necessary floor for economic growth. While the effective closure of the Strait of Hormuz is causing shipping lines to pull the plug on voyages due to spiking ins. costs, Abu Dhabi’s strategic ace remains the Habshan-Fujairah pipeline, which bypasses the strait to deliver 50% of the emirate's oil exports directly to the Gulf of Oman.

S&P projects the government will post fiscal surpluses averaging 3.8% of GDP through 2029, underpinned by a Brent price assumption of USD 65 / bbl. While surging crude prices are a net positive for the UAE as a major producer, the agency warns that “disruptions to the country’s critical infrastructure [add] further risks” to the outlook.

On the lending front, UAE banks are entering the crisis from a position of strength. Their “strong net external asset positions” mean the sector is well-capitalized and prepared to weather potential capital flight or outflows triggered by regional friction.

The outlook: The agency expects the war to recede within a few weeks, allowing for a period of recovery bolstered by the authorities’ strong balance sheet and their commitment to restoring stability. However, tourism, trade, and financial services are bracing for the heaviest impact this year, as the conflict “eats away at investor and consumer confidence.”

It’s not the UAE alone

S&P also slashed its forecast for the region over the next two years. The agency revised its real GDP growth forecast to an average of 2.5% over the two years, a significant drop from its previous 4.2% estimate. This slowdown is expected to be driven by a potential exodus of expats, thinning tourism receipts, and cooling demand in the real estate market.

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