Gulf banks can absorb war impact: S&P Global

S&P Global Ratings said Gulf banks are capable of absorbing slower growth, weaker profitability and a deterioration in asset quality metrics resulting from the war in the Middle East.

The agency said banks’ resilience is supported by strong capital buffers, cyclical declines in non-performing loans, current provisioning coverage, limited exposure to directly affected sectors, and regulatory easing measures.

S&P said a major escalation of the conflict could significantly slow economic activity and weaken investor sentiment, leading to greater pressure on Gulf banks. However, banks are expected to withstand severe stress, including capital outflows or a sharp deterioration in asset quality.

The agency said almost all Gulf banks’ rating outlooks remain stable, with the only negative outlook predating the war.

For Saudi Arabia, S&P said the impact of the conflict is lower than in other Gulf countries, supported by the East-West oil pipeline, which enables exports through Yanbu port, as well as the Kingdom’s large domestic market.

Meanwhile, the Saudi economy is reassessing its mega-project pipeline, with investments shifting toward alternative export routes for oil and petrochemicals, as well as security-related investments.

Mortgage growth is expected to remain limited due to persistently high interest rates and weaker economic sentiment.