Gulf Companies Brace for Unequal Financial Impact of Iran War in Upcoming Earnings Reports
DUBAI: As the Gulf region prepares for the release of second-quarter earnings, the financial repercussions of the ongoing conflict in Iran are expected to come into sharper focus. Companies across nations such as Saudi Arabia, Oman, the United Arab Emirates, and Qatar are likely to report mixed results, reflecting the diverse impacts of the war on various sectors.
Sector Vulnerabilities and Resilience
The banking and real estate sectors are particularly vulnerable, facing pre-existing challenges that have been intensified by the war’s influence on inflation and interest rates. In contrast, telecommunications companies appear to be more insulated, benefiting from long-term contracts and stable demand, according to industry analysts.
Energy companies are navigating a complex landscape, experiencing supply disruptions due to the four-month conflict while also potentially capitalizing on price volatility stemming from the closure of the Strait of Hormuz, a critical shipping route. Tariq Qaqish, deputy CEO at advisory firm FH Capital, noted that the second quarter will provide a clearer picture of the war’s impact, particularly as the first quarter only partially reflected the conflict’s effects.
Geographic Disparities in Economic Impact
The economic fortunes of Gulf countries, many of which are heavily reliant on hydrocarbons, are closely tied to their dependence on the Strait of Hormuz. According to HSBC forecasts, Saudi Arabia’s economy is projected to grow by 2.1% this year, bolstered by its oil terminals located on the Red Sea. Conversely, nations such as the UAE, Qatar, and Kuwait, which depend on the Strait for maritime access, are anticipated to experience economic contraction.
As tensions escalate and peace negotiations falter, the regional risk premium is likely to persist, as highlighted by Salman Ahmed, Fidelity International’s global head of macro and strategic asset allocation. The geopolitical landscape remains precarious, particularly following U.S. President Donald Trump’s announcement that an interim agreement to end the conflict was no longer viable after Iran’s recent attacks on U.S. bases in the Gulf.
Energy Sector Dynamics
Despite the challenges, oil and gas earnings are expected to remain robust, with elevated energy prices offsetting some losses due to supply disruptions. HSBC has revised its Brent crude forecast to $95 per barrel for 2026, predicting average prices of $114 for the second quarter. While Saudi Arabia has managed to maintain its export levels through the Red Sea, the UAE’s gas sector has faced setbacks, with ADNOC Gas forecasting a 19% year-on-year decline in domestic gas sales due to operational issues.
Telecommunications companies, including Saudi Arabia’s STC and Mobily, as well as the UAE’s e&, have demonstrated resilience amid the turmoil. The consumer sector, encompassing retail and tourism, is likely to reflect the disruptions caused by the conflict, although increased at-home consumption has provided a boost for some businesses. Notably, shares in Dubai’s food delivery service Talabat have surged by over 60% in the past three months, while Gulf airline flight volumes have nearly returned to pre-conflict levels.
Banking and Real Estate Sector Challenges
Forecasts indicate that banks across the Gulf region may report single-digit declines in second-quarter profits compared to the previous quarter. Elena Sanchez-Cabezudo, head of financials equity research at EFG Hermes, attributes this decline to reduced fee income linked to weaker trade finance and diminished credit card spending on international travel. The decline is partly a reflection of a strong performance in January and February, contrasting with the full quarter impacted by the ongoing conflict.
S&P Global Ratings has noted that while regional lenders maintain stable funding profiles, the uncertainty stemming from the war is likely to hinder their growth. Some banks in the UAE have responded by increasing interest rates for new savers to bolster deposits.
The UAE’s property market, which had previously enjoyed a prolonged boom, is now exhibiting signs of strain. Analysts have raised concerns about potential risks to expatriate inflows and tourism-related demand if geopolitical tensions persist. Some developers are taking precautionary measures to preserve liquidity, including delaying or reducing dividend payouts. Citi’s analysis indicates that residential sales in Dubai during the second quarter were significantly below pre-conflict levels, with a similar trend observed in Abu Dhabi. Major regional players include Emaar Properties and Aldar Properties.
Francesc Balcells, CIO EM debt at investment management firm FIM Partners, expressed a more optimistic view, noting that while some real estate developers may be lagging, regional credit spreads have returned to normal levels. He emphasized that many developers possess strong balance sheets, enabling them to withstand significant shocks.
The evolving situation in the Gulf underscores the intricate relationship between geopolitical events and economic performance, particularly in sectors sensitive to consumer demand and international trade. As companies prepare to disclose their financial results, the broader implications of the Iran conflict will likely continue to shape the regional economic landscape.
Source: GCC/gulf-companies-are-set-to-reveal-the-unequal-toll-of-iran-war-xq3le8gi”>www.zawya.com
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