Tensions in diplomatic relations between Saudi Arabia and the United Arab Emirates (UAE) are now starting to have a serious impact on the real sector. International business players, including giant financial institutions on Wall Street, are reportedly starting to formulate contingency measures to face potential disruptions to trade and investment in the Gulf region.
A recent report from Bloomberg titled "Wall Street Can’t Ignore the $3 Trillion Saudi-UAE Rift" reveals that the dispute between Riyadh and Abu Dhabi is no longer just a common regional political issue. This issue has transformed into a real geopolitical risk, forcing global investment banks and law firms to review their operational commitments in both countries.
A number of global financial institutions are reportedly starting to anticipate the worst-case scenario if this conflict continues to escalate, including the possibility of being forced to choose one partner between the two economic powers. Evaluation of business contracts, analysis of force majeure clauses, and a more selective approach to accepting new clients are now being actively conducted to avoid conflicts of interest.
Friction between the two wealthiest Arab nations is triggered by the accumulation of differing economic and geopolitical interests, especially following the escalation of military tensions in the Middle East. Economically, Saudi Arabia continues to strengthen its position to become the new regional business epicenter, while the UAE has taken aggressive steps to increase its oil production after leaving OPEC membership last May.
The stakes in this conflict are extremely high because Riyadh and Abu Dhabi collectively manage sovereign wealth funds worth $3 trillion, which serve as one of the main engines of global liquidity. It is feared that the rift in relations between the two countries could hinder the flow of this giant capital into international markets.
Indications of operational obstacles are even starting to be felt on the ground, with delays in truck logistics flow at the borders of the two nations and reports of financial transaction suspensions from Saudi banks to corporate accounts based in Dubai. Analysts warn that further escalation could trigger a crisis resembling the diplomatic boycott of Qatar in 2017, potentially shaking the stability of global financial markets.
