The UAE Central Bank urgently "infuses" over 8 billion US dollars to support the banking system to withstand the impact of Middle East conflicts.

J.P. Morgan analysts estimate that the Central Bank of the United Arab Emirates (UAE) has injected over 30 billion dirhams (about 8.2 billion USD) into the banking system to help withstand the impact of the Middle East conflict. Naresh Bilandani, Director of Equity Research for Middle East, Europe, and Africa (EMEA) at J.P. Morgan, wrote in a report to clients on Thursday that data from the UAE central bank shows that commercial lending institutions have used a tool called the Contingent Liquidity Insurance Facility (CLIF), which was launched in 2022. The UAE central bank has increased its support for the banking sector The UAE central bank introduced a support program earlier in March aimed at boosting the liquidity and lending capacity of the country's financial system. Naresh Bilandani stated that the UAE central bank "can activate the CLIF mechanism based on actual or potential exceptional pressures if necessary and at its discretion, which pressures may be systemic or individual entity-specific." He added, "CLIF allows banks to finance the UAE central bank's reserve funds with different types of collateral and is designed to be flexible to address the constantly changing market environment to support financing needs with a term of one month or more." Naresh Bilandani also noted that liquidity in the UAE banking system remains ample. As a sign of the UAE's economic resilience, several large hedge funds have recently issued statements expressing confidence in the UAE's position as a financial center. The Qatar Central Bank has also taken actions, including offering borrowers deferred repayment arrangements, lowering reserve requirements for deposits, and providing unlimited repo liquidity support. Gulf countries including the UAE, Qatar, and Saudi Arabia have large foreign exchange reserves and one of the world's largest sovereign wealth funds, providing strong support. It is worth noting that a report released by the United Nations on March 31 stated that a month of conflict in the Middle East could result in collective economic losses exceeding the entire annual growth of Arab countries in 2025. The report covers a wide region from Syria and Iraq to the Maghreb countries and Gulf countries. The report points out that the recent military escalation in the Middle East highlights the "structural vulnerabilities" of these economies. It also states that even "short-term shocks" could have "profound and widespread socio-economic impacts" on these countries. The report indicates that in the first four weeks after the breakout of conflict, economic losses in these countries could reach 3.7% to 6% of their Gross Domestic Product (GDP). The report states, "This translates to staggering losses of up to 120-194 billion USD, surpassing the cumulative GDP growth of the region by 2025." The United Nations Development Programme (UNDP) said the most severe losses are concentrated in the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) and Levant region, as they are highly vulnerable to global trade disruptions and energy market fluctuations, leading to declines in production, investment, and trade. The UNDP estimates that the Middle East conflict could lead to a loss of GDP of 5.2% to 8.5% for the Gulf Cooperation Council countries.