In more positive news, Moody's Ratings has affirmed the UAE’s Aa2 issuer and senior unsecured ratings with a stable outlook following a periodic review, according to a statement seen by EnterpriseAM.

The reason? “The economy's high per-capita income, robust institutions, and effective policymaking that underpin ongoing progress on economic diversification, and the federal government's very low debt burden,” Moody’s added.

Buffers remain strong: Despite near-term pressures, the federal government’s balance sheet is well insulated, supported by years of fiscal surpluses and access to sovereign wealth through the Emirates Investment Authority. Moody’s assumes full financial backing from Abu Dhabi — whose government financial assets exceed 300% of GDP as of the end of 2025 — in the event of stress.

Scorecard breakdown: The UAE’s economic strength is assessed at “aa3,” underpinned by high per-capita income levels, a diverse economy, and vast hydrocarbon reserves, Moody’s noted. The UAE institutions and governance are rated “a2,” reflecting a track record of effective policymaking and a relatively strong institutional framework. Fiscal strength comes in at “aa1,” driven by a very low federal debt burden and a history of balanced budgets, while susceptibility to event risk is rated “ba,” mainly driven by regional geopolitical tensions.

Regional geopolitical tensions are — unsurprisingly — the main downside risk. Other pressures include global carbon transition challenges and gaps in data transparency and disclosure.

Still — conflict impact is manageable: While there is a risk, Moody’s notes that the UAE is better positioned than some peers to handle logistical shocks. The Habshan-Fujairah pipeline allows the UAE to bypass the Strait of Hormuz, carrying roughly 1.8 mn bbl / d, or about two-thirds of Abu Dhabi’s pre-conflict exports.” This is also why the ratings agency maintains a stable outlook on the UAE.

Yes, but: The bigger problem is with the non-oil sector (read: The Big Story Today). “The conflict is also hindering non-oil economic activities and sectors sensitive to confidence, negatively affecting the UAE's overall economy,” Moody’s said in its review.

Growth outlook has been slashed: Under Moody’s baseline scenario, real GDP is expected to remain flat in 2026, a sharp downgrade from a pre-conflict growth projection of around 4.5%, as both oil and non-oil activity face headwinds. It’s not alone: S&P Global — which also affirmed the UAE’s rating in March — also revised downwards its growth forecast for the UAE, though it penciled in 2.2% growth at the time. Others like Goldman Sachs are much more pessimistic — expecting a full-on contraction of 5% if the war lasts through the end of April.

What could move the rating? Faster progress on economic diversification, improved transparency and data disclosure, easing geopolitical tensions, or a rating upgrade for Abu Dhabi could exert upward pressure. On the downside, an escalation of the current conflict — especially if critical oil infrastructure is damaged — or any weakening of Abu Dhabi’s financial support would weigh on the sovereign’s credit profile.

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