Gulf companies begin reporting second-quarter earnings this week, offering the first detailed look at how four months of war with Iran have reshaped the region’s economy.
Banks and real estate face the steepest exposure, worsened by the conflict’s effect on inflation and interest rates. Telecoms have fared better, protected by long-term contracts and steady demand. Energy companies dealt with supply disruptions from the war but also saw potential gains from price swings tied to the closure of the Strait of Hormuz.
“The second quarter is going to reveal the real impact of the war,” said Tariq Qaqish, deputy CEO at advisory firm FH Capital. He noted that the first quarter, only partly affected by a conflict that began at the end of February, showed just the initial hit to sectors like tourism and aviation.
Geography determines winners and losers
Regional economies built around hydrocarbons are diverging sharply based on how dependent they are on the Strait of Hormuz, the only sea route into the Gulf.
Saudi Arabia, which also operates oil terminals on the Red Sea, is projected to grow 2.1% this year, according to HSBC forecasts. Oman’s stock index, sitting outside the strait, has outperformed regional peers. The UAE, Qatar and Kuwait, all reliant on the shipping channel, are set to contract.
Salman Ahmed, Fidelity International’s global head of macro and strategic asset allocation, said the region’s risk premium is likely to persist as a peace deal comes under renewed threat from fresh strikes, pointing to Iran’s leverage over the strait. On Wednesday, President Donald Trump said an interim agreement to end the war was over after Iran carried out new attacks on U.S. bases in the Gulf.
“A further confidence shock would exacerbate risk for companies exposed to consumer and service demand,” S&P Global Ratings analysts said.
Energy and telecoms hold steady
Oil and gas earnings are expected to stay strong, with elevated prices partly offsetting volumes lost to damage and disruption. HSBC raised its Brent forecast to $95 a barrel for 2026 and now estimates second-quarter average prices of $114.
Saudi Arabia kept exports flowing through the Red Sea, but the UAE’s gas sector took a hit. ADNOC Gas forecast a roughly 19% year-on-year decline in domestic gas sales, tied to an incident at one of its plants.
Regional telecom operators have proved resilient, including Saudi Arabia’s STC and Mobily and the UAE’s e&.
The consumer sector, spanning retail and tourism, has shown clear signs of disruption, though increased at-home spending has offset some losses. Shares in Dubai food delivery firm Talabat have climbed more than 60% over the past three months. Gulf airline flight volumes have returned to near-normal levels.
Banks and real estate under pressure
Gulf banks are expected to post single-digit declines in second-quarter profits compared with the prior three months, said Elena Sanchez-Cabezudo, head of financials equity research at EFG Hermes. She pointed to weaker fee income from reduced trade finance activity and lower credit card spending on international travel.
Sanchez-Cabezudo said part of the decline reflects a strong January and February, before a full quarter of war weighed on the second-quarter numbers. She added that lenders have remained resilient thanks to abundant sector liquidity.
S&P Global Ratings described regional lenders as having stable funding profiles, but said war-related uncertainty is likely to slow their growth. Some UAE banks have raised interest rates for new savers in an effort to attract deposits.
UAE property markets, after years of growth, are now showing strain. Analysts have flagged risks to expatriate inflows and tourism-linked demand if tensions continue. Some developers have cut or delayed dividend payouts to preserve liquidity.
Citi said in a note that Dubai residential sales in the second quarter fell significantly below pre-conflict levels, with a milder decline in Abu Dhabi. Major developers in the region include Emaar Properties and Aldar Properties.
Francesc Balcells, chief investment officer for emerging market debt at FIM Partners, struck a more optimistic tone. He said some real estate developers are lagging, but regional credit spreads, the premiums investors demand to hold bonds, have returned close to normal levels. “It is just an issue of balance sheets,” he said. “These guys have very strong balance sheets, so they can withstand big shocks like this.”
