UAE Economic Slowdown Temporary, Set To Recover Fastest From Middle East War, Says Report

2026-06-14 04:23:44

(MENAFN- Khaleej Times) The UAE faces "a temporary slowdown" due to the regional military conflict and is positioned to recover the fastest due to its diversified export routes, such as the Fujairah oil pipeline and greater operational flexibility, said a global think-tank.

According to the Institute of International Finance (IIF), the UAE and Saudi Arabia are“positioned to recover the fastest due to diversified export routes, stronger infrastructure resilience, and greater operational flexibility.”

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It added that the UAE and Saudi Arabia "remain relatively resilient despite slower growth and export disruptions."

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However, Qatar and Kuwait face larger sector-specific challenges because of their dependence on LNG and Hormuz-linked exports, respectively.

Due to the closure of the Strait of Hormuz after the outbreak of the US-Israel-Iran war, oil supply has been severely disrupted, causing Brent to jump by up to 57 per cent. Crude oil prices have eased, with Brent closing at $87 a barrel over the weekend.

The UAE is building a second oil pipeline bypassing the Strait of Hormuz, which will allow the country to double its supply of oil.

Sultan Ahmed Al Jaber, Minister of Industry and Advanced Technology and Managing Director and Group CEO of Adnoc, said on May 20 that the UAE has accelerated the development of its second pipeline, with delivery planned for next year.

Temporary shock

Garbis Iradian, Chief Economist for Mena and Central Asia at IIF, said the "UAE is experiencing a temporary shock to an otherwise diversified and resilient growth model."

"Strong sovereign balance sheets, large wealth funds, low public debt, and a well-capitalised banking system limit solvency and liquidity risks," he said, adding that the Iran war does not constitute a macro-financial crisis.

The latest study by IIF noted that a near-term slowdown is likely, but Dubai's structural strengths – global connectivity, regulatory flexibility, and a diversified services base – position it to recover once regional conditions stabilise.

"Abu Dhabi provides the stabilising anchor. Higher oil prices may offset lower export volumes, while sovereign wealth assets exceeding 200 per cent of GDP give the authorities ample space to sustain investment and support liquidity. Over the medium term, the crisis may ultimately strengthen Abu Dhabi's position as a global energy supplier while accelerating Dubai's evolution toward a more diversified hub for finance, technology, logistics, tourism, and high-value services," Iradian said in the latest regional report – The Middle East: Energy Strain and Security Realignment.

GCC growth forecasts

Earlier, the International Monetary Fund and World Bank had also projected strong growth for the UAE and GCC economies in 2026 and 2027 after slower growth in 2025 due to the regional military war.

The IIF report projected 8.1 per cent for Kuwait, 4.8 per cent for Qatar, 4.4 per cent growth for the UAE and Saudi Arabia, 3.8 per cent for Oman, and 3.3 per cent for Bahrain.

Importantly, the study noted that the UAE's decision to leave OPEC+ marks a major strategic shift, reinforcing its push for export flexibility and an independent production policy.

"Broader discussions on east–west energy corridors, pipeline expansion, and deeper Gulf–Asia integration have gained momentum, underscoring how the conflict is accelerating a reconfiguration of regional energy architecture," it said.