Credit rating agency Fitch Ratings expected that the US tariffs introduced by President Donald Trump will have only a limited direct impact on banks in the Gulf Cooperation Council (GCC).
On April 2, Trump announced a 10 percent tariff on goods from all countries, along with steeper duties on countries his administration accused of imposing high tariffs on US imports. However, he later suspended most of these tariffs for 90 days.
Fitch pointed to indirect effects stemming from weaker global economic activity, which could push oil prices lower and reduce government spending in the GCC. This, in turn, would play a significant role in shaping the overall macroeconomic and banking outlook across the GCC.
The agency noted that hydrocarbon exports—mainly oil and gas—dominate the GCC’s trade with the US and are exempt from the tariffs, which benefits oil-exporting Gulf nations. By contrast, non-hydrocarbon exports such as aluminum and steel, which are subject to 10 or 25 percent duties, remain relatively small. As a result, the direct economic impact of the tariffs on GCC countries and their banking sectors is expected to be minimal.
Still, Fitch warned that a further drop in oil prices could weaken lending growth forecasts compared to its December 2024 Middle East Banks Outlook 2025, which had projected growth levels largely in line with 2024.
Brent crude is currently trading near $65 per barrel, down from $75, with the decline driven in part by market reactions to Trump’s tariff policy. According to Fitch, oil market balance and prices will be shaped primarily by global economic trends and OPEC+ supply management. The alliance began easing production cuts starting in April.
In March 2025, Fitch lowered its global GDP growth forecast to 2.3 percent for the current year and 2.2 percent for 2026, citing rising risks of a sharper slowdown. This could place downward pressure on global commodity prices, including oil.
Before the tariffs were announced, Fitch had projected that GCC non-oil GDP would grow by more than 3.5 percent in both 2025 and 2026. However, declining oil revenues could lead to slower non-oil economic activity and reduced government spending, putting pressure on loan growth in the region’s banking sector.
Fitch also warned that credit conditions could deteriorate for banks if companies in affected sectors experience declining profitability and weaker cash flows due to higher operating costs and inflation triggered by tariffs.
Despite these risks, GCC banks are generally in a strong position to weather a more challenging environment. Many banks have boosted their capital buffers in recent years, supported by high oil prices, strong earnings, favorable interest rates, abundant liquidity, and solid economic activity.
Saudi banks have the strongest credit ratings in the region, with Fitch assigning them an “A+” rating and a stable outlook—among the highest in the Gulf.
Banks in the UAE are rated “AA-” with a stable outlook, followed by Qatar at “AA”, Kuwait at “AA-“, and Oman at “BB+” with a positive outlook.
