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UAE well-placed to navigate regional uncertainty, S&P says
While some sectors are experiencing a period of adjustment, the ratings agency believes the country's strong fundamentals will help support a gradual recovery and long-term growth
- PUBLISHED: Wed 22 Jul 2026, 10:54 AM
The UAE economy is expected to demonstrate resilience and adaptability despite the challenges posed by the ongoing conflict involving Iran and the wider region, according to a new report from S&P Global Ratings. While some sectors are experiencing a period of adjustment, the ratings agency believes the country's strong fundamentals will help support a gradual recovery and long-term growth.
S&P noted that risks across the Gulf are not evenly distributed and that the UAE remains among the countries with the strongest capacity to withstand external shocks, thanks to its diversified economy, robust infrastructure and financial buffers. The agency said the conflict's impact is increasingly shifting from immediate operational disruption toward a period of uncertainty that could influence business confidence and investment decisions.
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However, the report paints a largely measured picture for the UAE. S&P said that its base-case scenario assumes disruptions in the Strait of Hormuz ease during the second half of 2026, supporting a recovery in trade flows and economic activity. It also highlighted that the UAE, along with Saudi Arabia, Kuwait and Qatar, maintains a "strong capacity to absorb shocks."
Tourism and aviation, two sectors that felt the immediate impact of regional tensions, are already showing signs of stabilisation. Although hotel occupancy and passenger traffic declined after the outbreak of the conflict, S&P expects conditions to improve later this year. "We expect occupancy should improve starting in the fourth quarter of 2026," the report said, citing Dubai's strong infrastructure and global connectivity as key strengths.
The UAE property market is also adjusting from a period of exceptionally strong growth. While transaction volumes have moderated, S&P noted that price movements have so far been limited and that demand remains supported by the country's continued attractiveness to investors, businesses and skilled professionals. Abu Dhabi, in particular, is expected to benefit from relatively balanced supply conditions.
Elsewhere, several sectors continue to display notable resilience. Healthcare is supported by strong demand and government initiatives, while telecommunications and utilities are expected to remain largely insulated from regional volatility because they provide essential services. Construction activity also remains robust, backed by major development projects across the UAE despite higher logistics and material costs.
Associate Editor Somshankar Bandyopadhyay brings more than three decades of experience to the KT newsroom. Currently, he manages the news production of the business section, ensuring that the top economic and business news of the day reaches its readers.