United Arab Emirates Country Risk Rating

The UAE's overall risk level remains medium low. Political violence and political interference are also assessed as medium low. As with other countries from the GCC, the UAE has suffered from the conflict in Iran. Indeed, since the beginning of the conflict and as of April 8th, UAE air defenses had engaged 537 ballistic missiles, 26 cruise missiles and 2,256 drones, according to the Ministry of Defense, with airports, ports and energy facilities among the sites hit. Overall, the UAE's position in the conflict has been more confrontational than that of its Gulf peers. In May, the Wall Street Journal reported that Emirati forces had struck Iranian territory, among them the Lavan Island oil refinery. This marked a sharp reversal, as Abu Dhabi had initially assured Tehran that its territory would not be used for attacks, but its stance shifted as Iranian strikes mounted and it also reportedly granted US forces operational access. Relations with Saudi Arabia have also seen some developments in 2026. First, Saudi forces intervened against the Southern Transitional Council in late 2025 and early 2026 to reverse its seizure of Aden, and Riyadh accused the UAE of backing the group. Second, the UAE left OPEC on May 1st, which signals Abu Dhabi's determination to reclaim full sovereignty over its production and pricing decisions, prioritizing flexibility for its diversification agenda over cartel discipline. Regardless of these developments, consensus-based governance structure among the emirates minimizes domestic uncertainty and limits external interference, supporting a stable political environment in the country.

The risk of doing business remains medium low, although the war has dented the country's safe-haven image. Equity markets in Dubai and Abu Dhabi shed roughly USD 120bn in the weeks after the outbreak, with the Dubai benchmark falling about 16%, even as exchanges in Saudi Arabia and Oman posted gains over the same period. The structural picture nonetheless remains strong, with non-oil sectors now accounting for close to 80% of GDP. Even so, as a consequence of the Iran conflict, Dubai International Airport has been disrupted multiple times. Fujairah, the country's main outlet for exports that bypass Hormuz, was struck repeatedly. In this regard, authorities have approved a series of measures to protect the supply base as a response to the conflict. For instance, in April the Cabinet approved a National Industrial Resilience Fund of AED 1bn to localize vital industries and build strategic stockpiles, while the Ministry of Foreign Trade launched a National Program to Strengthen Supply Chain Resilience aimed at securing essential goods and reducing dependence on single import markets. Moreover, business confidence and tourism will only return when the U.S./Iran MOU is extended and shipping through the Strait returns to more normal levels.

On the economic front, the IMF now projects the UAE to grow 3.1% in 2026, down from the 5% it expected before the war, with a rebound of 5.3% anticipated in 2027 as hydrocarbon output and regional trade normalize. Before the conflict, the Fund attributed the country's above-average momentum to robust non-hydrocarbon activity and a rebound in hydrocarbon output, supported by strong performance in tourism, real estate and financial services. Data from the IMF’s April Fiscal Monitor puts UAE’s general government overall surplus balance as percentage of GDP at 4.9% in 2026 and at 4.8% in 2027, while general government gross debt at 31.4% of GDP in 2026 and 30.1% in 2027. Overall, the sovereign non-payment risk is assessed as medium low, while the risk of the government's inability to provide stimulus is classified as low.

The banking sector vulnerability is medium low and the exchange transfer risk is low. Bank balance sheets expanded rapidly, with system assets up 17.1% over 2025 to AED 5.34 trillion and double digit growth in both lending and deposits, while prudential metrics stayed comfortably above regulatory floors, with a capital adequacy ratio of 17.1%, a loan to deposit ratio of 77.7% and a declining non-performing loan ratio. The war has nevertheless strained bank liquidity, prompting the central bank in March to announce a support package that gives banks enhanced access to reserve balances of up to 30% of the cash reserve requirement together with term liquidity facilities in both dirhams and dollars, while the authorities have requested a swap line with the US to ease dollar funding pressures as conflict-related receipts fell. External buffers are exceptionally strong, with the monetary base cover of FX reserves at a record level close to 119%.