Gulf Corporate Earnings Face Iran War Reality Check

The conflict has created a divergent landscape across the region, heavily influenced by geography and infrastructure. Countries reliant on the Strait of Hormuz, such as the UAE, Qatar, and Kuwait, face the most significant exposure to recent security threats. Conversely, Saudi Arabia has maintained relative stability by utilizing Red Sea export terminals. HSBC projects the Saudi economy will grow by 2.1% this year, while Oman’s stock market has shown resilience due to its strategic position outside the contested strait.

Corporate performance reflects these uneven pressures. Energy firms navigated operational hurdles with Brent crude averaging $114 per barrel during the quarter, according to HSBC estimates. This price surge provided a buffer against disruptions, though some entities like ADNOC Gas reported a 19% year-on-year decline in domestic sales. Meanwhile, the telecommunications sector, led by Saudi Arabia’s STC and the UAE’s e&, remains a rare bright spot, shielded by long-term contracts and stable demand.

Financial institutions and the real estate market are showing clearer signs of strain. EFG Hermes expects bank profits to dip by single-digit percentages as trade finance and travel-related fees dwindle. Simultaneously, Dubai’s residential property market has seen sales drop below pre-war levels, prompting some developers to defer dividend payments. Despite these challenges, analysts at FIM Partners and S&P Global Ratings note that most regional firms retain robust balance sheets, suggesting an ability to absorb current shocks provided the geopolitical climate does not deteriorate further following the collapse of the interim U.S.-Iran agreement.