S&P puts numbers on the UAE’s worst year in recent memory

There’s good news and bad news from S&P Global, which just published the most comprehensive assessment yet of the impact of the war on the UAE’s economy.

The bad news first: S&P estimates UAE real GDP will contract by 2.7% in 2026, after 6.2% growth in 2025. Oil production, which averaged 3.14 mn bbl / d in 2025, is forecast to average just 2.5-2.6 mn bbl / d this year. Meanwhile, tourism has cratered, real estate has softened, and manufacturing, trade, and construction have all taken a hit — altogether, that’s about 45% of the UAE’s GDP.

The good news — and S&P is clear about this — is that the UAE entered the crisis in unusually strong shape. Sovereign wealth fund assets and foreign exchange reserves amount to roughly 200% of GDP. The fiscal breakeven oil price sits at around USD 45 per barrel, one of the lowest in the world. Non-oil growth has averaged about 7% annually for five years. The UAE’s buffer stack is deep enough that, even in an extreme scenario where oil production stopped entirely with zero spending cuts, S&P estimates the government would only slip into deficit after about six months.

The other good news: S&P’s base case assumes Hormuz disruptions begin easing in the second half of 2026, following the US-Iran framework memorandum of understanding signed this month.

Yes, but: The recovery, assuming a truce holds, will be gradual — operational bottlenecks, damaged infrastructure, shipping ins. constraints, and lingering risk aversion will take time to unwind. And it’s very likely we won’t see real recovery until 2027, which is when S&P Global sees higher oil production, a return to tourism, real estate stabilization, and fiscal surpluses averaging 7% of GDP over 2027-2029.

The Opec exit will help: S&P Global expects Adnoc to ramp up production to 4 mn bbl / d next year, up from 3.4 mn bbl / d in February, before reaching 5 mn bbl / d in 2029. The official target for Adnoc has been to reach 5 mn bbl / d next year. On those numbers, it sees real GDP growth averaging 6% in 2027-2029.

The emirate-by-emirate picture

Not all of the UAE is hurting equally: The war has exposed a fault line that’s always been there — Abu Dhabi’s deep dependence on hydrocarbons vs. the more diversified economic base of the northern emirates.

S&P forecasts a contraction of roughly 9% of GDP for Abu Dhabi in 2026 — the steepest for any emirate — as hydrocarbons account for 44.4% of its economy and non-oil economic activity takes a hit.

Dubai is forecast to contract by about 2.5% — a meaningful blow to an economy built on hospitality, trade, and real estate. Occupancy in Dubai dropped to around 33% in March 2026, down from 84.7% in February, and several airlines have suspended routes to the Middle East through at least 3Q 2026, meaning the tourism slowdown is not over. Real estate transaction volumes have cooled sharply since March, and S&P expects prices and rents to decline in 2026 as new supply hits a softening market. The luxury and ultra-luxury segments are flagged as the most vulnerable, given that ultra-high-net-worth individuals have more options.

Sharjah and Ras Al Khaimah are, counterintuitively, doing relatively well — S&P forecasts growth of around 2% for each in 2026. Sharjah is benefiting from its proximity to Dubai (whose rising costs pre-war had already been pushing demand eastward) and relatively stable industrial real estate. It’s also benefiting from trade through Khor Fakkan port, which sits outside the Strait of Hormuz and has been handling sharply higher container volumes since Jebel Ali and Khalifa Port slowed.

RAK is seeing a surge in domestic tourism, offsetting the decline in international arrivals, and demand for its mining products within the UAE and Gulf has softened the blow from lower exports. The Wynn project and most real estate and tourism investments have restarted after a brief pause at the start of the war.

Fujairah, not rated by S&P, is also likely a beneficiary. Its port activity has risen sharply for the same reason as Khor Fakkan: it sits outside the strait, making it accessible when the main ports aren’t. It’s also set to draw a slew of new investments as part of the government’s push to reduce dependency on the strait, including the development of new pipelines, rail, and road networks to improve connectivity between oil and gas fields and its port.