S&P Global Ratings expects the current regional conflict affecting the Gulf to ease within weeks, even as it reaffirmed Abu Dhabi’s sovereign credit rating amid heightened geopolitical tensions.
In a research update published on March 6, the ratings agency affirmed ‘AA/A-1+’ long- and short-term sovereign ratings with a stable outlook for both the UAE and the Emirate of Abu Dhabi, placing them among the strongest sovereign credits globally.
Abu Dhabi’s large sovereign wealth assets and fiscal buffers underpin the UAE’s overall credit profile and provide a significant cushion against geopolitical shocks. The AA rating places Abu Dhabi among the world’s strongest sovereign credits, just one notch below the highest possible AAA rating.
A separate note from S&P on Abu Dhabi’s rating highlighted how recent developments have affected the outlook.
“Our current expectations are that regional war — and threats to Abu Dhabi’s key infrastructure — will recede after a few weeks, and a period of recovery will be enabled by the authorities’ strong balance sheet and willingness to resume stability,” S&P said.
The assessment comes during one of the most volatile periods in the region in recent years, following escalating military exchanges between Iran and several countries in the Gulf.
S&P said Abu Dhabi’s financial strength remains a key stabilising factor, with the emirate’s large fiscal and external buffers expected to help absorb potential economic shocks linked to the conflict.
“Our base-case scenario remains that Abu Dhabi’s substantial fiscal, economic, external, and policy flexibility will act as an effective buffer against the impacts of regional conflict,” the agency added.
The outlook from S&P broadly echoes commentary published by Moody’s last week on the GCC insurance sector, in which the ratings agency said it expects the current conflict to be relatively short-lived.
Moody’s said its baseline scenario assumes the military escalation would likely last no more than four weeks, limiting the longer-term economic impact on regional financial institutions and insurers.
Read more: Ratings agency Moody’s expects Iran conflict to be “relatively short-lived”
Despite its relatively optimistic outlook on the duration of the conflict, S&P warned that the escalation could still weigh on economic activity in the near term.
The agency said the “intensity and scope of Iranian military action will reduce growth and weaken external and fiscal performance over 2026.”
Sectors such as tourism, trade, supply chains and financial services could experience temporary disruptions if tensions persist, while investor and consumer confidence may also be affected.
Even so, Abu Dhabi’s sovereign balance sheet remains one of the strongest globally. S&P estimates the government’s net asset position will reach about 358 per cent of GDP in 2026, providing a substantial buffer against external shocks.
The agency also noted that infrastructure damage so far appears limited despite recent attacks targeting parts of the region.
Overall, S&P said the emirate’s strong fiscal position, large sovereign wealth assets and track record of policy stability should help it navigate the current geopolitical shock and support a recovery once tensions ease.
