Gulf banks hold steady amid war tensions

Conflict involving Iran, Israel and the United States has entered a second week, prompting heightened caution across financial markets in the Gulf while investment banks operating in the region signal that their local operations remain in place despite escalating security warnings.

Financial institutions active in the Gulf Cooperation Council have indicated that dealmaking teams and advisory units will continue functioning as normal even as geopolitical risk intensifies. The reassurance came after Iran’s Islamic Revolutionary Guard Corps issued a warning that economic centres and banks linked to US and Israeli interests could become targets, raising concerns about potential disruptions to financial infrastructure across the region.

Investment banks had expanded their presence in the Gulf during the past two years as sovereign wealth funds, state-backed companies and large corporates accelerated capital-raising plans. Debt capital markets and equity capital markets activity surged across Saudi Arabia, the United Arab Emirates and Qatar, prompting global banks to build larger regional teams to capture mandates tied to privatisations, infrastructure financing and energy transition projects.

Senior executives at several international lenders said the geopolitical escalation had not prompted plans to scale back Gulf operations, although risk assessments were being reviewed closely. Banking groups have strengthened contingency planning and security protocols for staff while monitoring developments across regional shipping routes, energy markets and aviation networks that could influence investor sentiment.

Gulf financial centres have developed a reputation for resilience during periods of regional tension, supported by strong sovereign balance sheets and deep pools of state-backed capital. The UAE and Saudi Arabia host many of the largest investment banking operations in the region, with institutions such as Goldman Sachs, JPMorgan Chase, Morgan Stanley and HSBC expanding their coverage teams to serve sovereign wealth funds and government-linked companies pursuing large transactions.

Capital markets momentum has been a central driver behind the expansion. Saudi Arabia’s Public Investment Fund and other state entities have raised billions of dollars through international bond sales, while companies linked to energy, logistics and telecommunications sectors tapped equity markets to fund expansion. Abu Dhabi and Dubai also witnessed a wave of listings and debt issuance as governments sought to deepen financial markets and attract global investors.

Advisory firms say the scale of planned projects in the Gulf, particularly those tied to economic diversification strategies, continues to draw global banks despite heightened geopolitical volatility. Large infrastructure developments, renewable energy investments and technology initiatives require complex financing structures, giving international lenders a strong incentive to maintain a physical presence in the region.

The IRGC’s warning has nevertheless introduced a new layer of uncertainty for financial institutions whose regional operations involve close ties with Western clients and Israeli-linked companies. Analysts note that while Gulf states maintain diplomatic and security partnerships with the United States, their financial systems also host multinational corporations and banks from across Europe and Asia, making them central nodes in global capital flows.

Security experts say threats directed at economic infrastructure often aim to create psychological pressure rather than trigger direct attacks on financial institutions. Gulf governments have historically responded to such risks by reinforcing physical security around major financial districts and tightening cyber-defence systems designed to protect banking networks.

Financial markets across the Middle East have remained relatively stable during the conflict’s early phase, though energy prices and shipping insurance costs have shown volatility. The Strait of Hormuz, a vital artery for global oil trade, remains under close watch by energy companies and insurers as any disruption could ripple across commodity markets and government revenues in the Gulf.

Investment bankers say that while geopolitical uncertainty can delay transactions temporarily, large-scale projects in the region typically move forward because they are backed by sovereign funds with long-term investment horizons. Sovereign wealth vehicles such as the Abu Dhabi Investment Authority, Mubadala Investment Company and the Public Investment Fund continue to deploy capital globally, reinforcing the Gulf’s position as a major financial hub.

Deal pipelines remain active across sectors including energy infrastructure, logistics corridors, aviation and artificial intelligence. Financial advisers note that Gulf governments are increasingly tapping international capital markets not only to finance domestic projects but also to expand overseas investments, a strategy that requires ongoing collaboration with global banking groups.

Bank executives also emphasise that Gulf financial centres have built sophisticated regulatory frameworks designed to reassure international investors during periods of instability. Dubai International Financial Centre and Abu Dhabi Global Market operate under legal systems aligned with international standards, which has helped attract asset managers, hedge funds and private-equity firms seeking a base in the region.