The GCC banking sector could face between USD 111-260 bn in outflows, as the US-Iran conflict escalates toward a broader regional crisis with a credible threat to the Strait of Hormuz, according to a recent Bloomberg Intelligence report picked up by Asharq Business and an article by Fitch Solutions’ research unit BMI. This again confirms what we’ve reported on the UAE potentially seeing moderate outflows as the war shakes expat confidence in the Emirates’ safe-haven label.

Trade and travel disruptions are putting the “safe haven” assertion to the test. While elevated energy prices are providing a fiscal cushion for some, the physical disruption of trade and travel is forcing a sharp sell-off among some regional bourses and testing the GCC’s long-standing narrative as a global safe haven, BMI explains.

The UAE is particularly exposed to banking volatility due to its high expat population — representing roughly 85-88% of the total — which has been a primary driver of banking liquidity since 2021, according to Bloomberg Intelligence. Non-resident deposits, meanwhile, constitute about 8% of total liquidity inflows, exposing roughly half of retail deposits to extreme volatility.

Still, UAE banks collectively possess a significant liquidity surplus of USD 87 bn, which is sufficient to cover 30% of anticipated retail withdrawals over a three-month period.

Emirates NBD and Abu Dhabi Islamic Bank are currently the best positioned to weather the storm. On the other hand, smaller players like Commercial Bank International and United Arab Bank are showing negative three-month cashflows, signaling a potential tightening of liquidity.

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