You wouldn’t believe that a war had been going on since the end of February if you looked at the financial statements of the majority of Gulf banks by the final week of July. Profits don’t seem to be impacted. Compared to the first half of 2025, all of the major banks reported increased net earnings.
Additionally, loan balances have increased, sometimes significantly. In the first half of this year, the financing assets of Qatar Islamic Bank rose by 13%, while the loan portfolio of Abu Dhabi Commercial Bank grew by 10%. Strong loan growth, robust capital buffers, and stable local economies are projected to sustain Gulf banks’ profitability in 2026 despite escalating geopolitical concerns in the Middle East.
Even as anxiety rises, analysts believe large lenders in the region continue to profit from increased lending activity and stable revenue streams. A protracted regional conflict, however, would raise credit risks, requiring banks to reevaluate loan portfolios and boost default provisions. Additionally, rating agencies have cautioned that prolonged instability might eventually erode borrower repayment capacity and put pressure on asset quality.
If hostilities continue, Indian and Asia-Pacific banks with exposure to the area may face similar challenges. Banks are keeping a careful eye on geopolitical developments to safeguard profitability and preserve balance-sheet resilience in an unpredictable economic climate, even if the sector is nonetheless financially robust for the time being.
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