Gulf companies start reporting second-quarter earnings this week, and investors are treating them as the first complete snapshot of what the Iran war and Strait of Hormuz disruption did to the region’s finances. The conflict, which began late in February, mostly showed up as an initial jolt in first-quarter reports. A full quarter of disruption is now expected to reveal sector-by-sector damage—from lending and payments to property transactions.
As FH Capital, an investment firm, put it: “The second quarter is going to reveal the real impact of the war.”
Banks and Real Estate in the Crosshairs
Analysts see banks and real estate as the most exposed. EFG Hermes, a Middle East investment bank, expects Gulf lenders to post single-digit profit declines versus the previous quarter. The culprit: softer fee income as trade finance slows and people cut back on international travel spending. When shipping through the Strait of Hormuz is disrupted, trade finance—a key revenue line for many Gulf banks—dries up, and consumer spending on travel and cards also takes a hit.
Real estate faces its own pressures. Citi flagged that Dubai residential sales in the second quarter were “significantly below pre-conflict” levels. That puts the focus on developers like Emaar Properties and Aldar Properties. When transaction volumes cool, near-term cash inflows and presales tend to slow too. That dynamic pushes management teams to protect liquidity—including by reducing or delaying dividends and pausing discretionary projects.
Steadier Sectors: Telecom and Oil
Other corners of the Gulf economy look more resilient. Telecom operators like Saudi Arabia’s STC and Mobily and the UAE’s e& have subscription-style revenues that don’t swing much in a downturn. People still pay their phone bills even when the economy wobbles, making these stocks a relative safe haven.
Oil and gas profits are still expected to benefit from higher prices, even if shipments were interrupted. The Strait of Hormuz is a critical chokepoint for global oil flows, and any disruption tends to push crude prices up. That helps energy companies’ bottom lines, though it also adds to broader economic uncertainty.
At the country level, reliance on the strait shapes the hit. Nations like Saudi Arabia and the UAE, which depend heavily on oil exports through the waterway, face greater fiscal strain than those less exposed. That matters for everything from government budgets to consumer confidence.
What It Means for Investors
The earnings season creates a split screen for investors. Francesc Balcells at FIM Partners, an asset manager, said regional credit spreads were “pretty much back to normal” and developers have “very strong balance sheets.” That helps bondholders feel cushioned against refinancing risk. But share prices can stay more sensitive to confidence and sales momentum, especially heading into earnings season when guidance becomes the main catalyst.
For stock investors, the key question is whether management teams will cut dividends or pause projects to preserve cash. If they do, it could weigh on share prices even if the underlying businesses are sound. Bondholders, by contrast, may be more focused on balance sheet strength and the ability to service debt.
The broader market backdrop also matters. Global investors are watching how the conflict evolves and whether it disrupts energy supplies further. For everyday investors in Gulf stocks, the takeaway is clear: second-quarter results will provide the first real test of how the war has hit different sectors. Banks and real estate are the most vulnerable, while telecom and oil offer more stability. As always, diversification across sectors can help manage risk in uncertain times.
For more on how other markets are reacting to global disruptions, see our coverage of iron ore prices staying flat amid a strike threat at Port Hedland and Delta's earnings preview.
