Gulf banks could lose USD 307 billion if war with Iran drags on

If war with Iran drags on, Gulf banks could face a USD 307 billion outflow of domestic deposits. Reuters reports, citing S&P Global Ratings.

S&P analysts say there are no signs of a significant outflow of foreign or domestic funding at the moment. They warn that a prolonged conflict could lead to investors selling high-risk assets in droves and buying safer, more stable instruments (flight to quality).

S&P's baseline scenario assumes that the intense phase of the war with Iran will last two to four weeks. However, the agency acknowledges that side effects and periodic security incidents could extend beyond that period. The war between Israel and the United States is now in its third week and there is no end in sight.

According to S&P, in the event of an extremely unfavorable scenario, the combined losses of the 45 largest banks in the Persian Gulf could amount to about USD 37 billion.

The agency drew parallels with the shock caused by the COVID-19 coronavirus pandemic. Then, regulators took measures to allow banks to absorb loan impairments.

As Ukrainian News Agency earlier reported, on March 16, Bloomberg wrote that Taiwan is facing an energy shortage due to the war against Iran. Their shortage could affect the work of TSMC, which produces 90% of the world's advanced integrated circuits.

As a reminder, a number of aluminum producers in the Middle East were forced to suspend work due to the war against Iran. This negatively affected the price of the metal on the market.

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