The UAE’s economy is expected to remain resilient despite escalating geopolitical tensions in the Middle East, supported by strong fiscal buffers, diversified growth engines and one of the world’s largest sovereign wealth portfolios, according to the latest assessment by S&P Global Ratings.
The ratings agency reaffirmed the UAE’s ‘AA/A-1+’ sovereign credit rating with a stable outlook, highlighting the country’s exceptional fiscal and external strength even as regional conflict raises short-term economic risks.
S&P analysts Juili Pargaonkar and Olivia K. Grant said the UAE’s vast financial resources and policy flexibility should help shield the economy from the worst effects of regional instability.
“Our base-case scenario remains that the UAE’s substantial fiscal, economic and external buffers will act as an effective shield against the impact of regional conflict,” the analysts said.
While the ongoing tensions in the Gulf may temporarily weigh on tourism, trade and investment flows, S&P expects the UAE’s strong balance sheet and diversified economic base to enable a rapid recovery once geopolitical tensions ease.
The ratings agency estimates that the UAE government’s consolidated net asset position will reach about 184 per cent of GDP in 2026, one of the strongest sovereign balance sheets globally. Government liquid assets, including sovereign wealth funds such as Abu Dhabi Investment Authority (ADIA) and Emirates Investment Authority, are estimated to exceed 210 per cent of GDP, providing a powerful cushion against economic shocks.
At the same time, the country’s public debt remains relatively low. S&P estimates general government debt at about 27 per cent of GDP, compared with significantly higher levels in many advanced economies.
These strong fundamentals have enabled the UAE to maintain consistent fiscal surpluses in recent years. Between 2021 and 2025, the consolidated fiscal balance averaged a surplus of 5.6 per cent of GDP, driven by strong hydrocarbon revenues and robust non-oil growth.
Even with rising geopolitical tensions and increased spending, S&P expects the government to maintain a fiscal surplus averaging 2.6 per cent of GDP between 2026 and 2029.
Oil production will continue to underpin the economy, although the UAE’s diversification strategy has reduced reliance on hydrocarbons. S&P forecasts oil production to remain stable at around 3.3 million barrels per day in 2026-2027, up from about 3.14 million barrels per day in 2025.
Meanwhile, major projects such as the Ghasha gas development and Ruwais liquefied natural gas expansion are expected to significantly increase Abu Dhabi’s gas output and strengthen long-term energy security.
Despite these strengths, the rating agency has lowered its near-term growth forecasts due to the impact of the regional conflict.
S&P now expects the UAE’s real GDP growth to average 2.5 per cent in 2026-2027, down from its earlier projection of 4.2 per cent, reflecting weaker tourism demand, potential expatriate outflows and declining real estate activity if the conflict persists.
Nevertheless, the UAE’s diversified economic structure remains a key source of stability. Non-oil sectors now account for around 75 per cent of GDP, driven by trade, logistics, tourism, financial services and technology.
The country’s role as a global trade hub will also support long-term growth. The UAE has signed multiple Comprehensive Economic Partnership Agreements (CEPAs) with major partners including India, Indonesia and Turkey, boosting cross-border trade and investment flows.
According to the UAE Ministry of Economy, non-oil foreign trade exceeded Dh3.5 trillion in 2025, reinforcing the country’s position as one of the world’s leading logistics and commerce centres.
Another key strength is the UAE’s ability to export oil through alternative routes even if maritime trade is disrupted. The Abu Dhabi Crude Oil Pipeline (ADCOP) to Fujairah can transport about half of Abu Dhabi’s oil exports directly to the Indian Ocean, bypassing the Strait of Hormuz.
This infrastructure significantly reduces the risk of supply disruptions during geopolitical crises.
The UAE’s current account surplus is also expected to remain strong, averaging about 8.6 per cent of GDP between 2026 and 2029, although lower than the 13 per cent surplus recorded in 2025.
GDP per capita is projected to remain relatively high at about $48,900 in 2026, reflecting the country’s strong productivity and high-income economy.
Analysts say the UAE’s policy framework, large sovereign wealth reserves and global economic integration will continue to underpin its credit strength.
“Even in periods of geopolitical volatility, the UAE’s financial buffers and diversified economy provide substantial resilience,” S&P said.
Economists say while the regional conflict may slow economic momentum in the short term, the country’s strong fiscal position and strategic investments are expected to support a steady recovery and long-term growth trajectory.
