UAE central bank injects funds to calm lenders amid Iran war

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UAE central bank injects funds to calm lenders amid Iran war

March 19, 2026

DUBAI,— Shares of banks listed in the United Arab Emirates surged Wednesday after the Central Bank of the UAE unveiled measures to boost liquidity amid the ongoing Iran crisis that is shaking Gulf economies.

The central bank’s package, announced in a statement dated March 17, allows banks to access up to 30% of their cash reserve requirements and provides term liquidity facilities in both UAE dirhams and U.S. dollars.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the measures resemble actions taken by the central bank during the COVID-19 pandemic.

The plan is designed to keep banks well-funded and maintain the flow of loans to businesses and households,” Malik said. “It helps sustain overall economic stability and market confidence.

Shares of Emirates NBD and Abu Dhabi Islamic Bank initially jumped over 9% before easing slightly, while Abu Dhabi Commercial Bank rose as much as 6.6%. First Abu Dhabi Bank, the UAE’s largest by assets, closed down 3.6%.

Naresh Bilandani, head of CEEMEA equity research at Jefferies, said First Abu Dhabi Bank is seen as a defensive option compared with its peers and remains Jefferies’ preferred UAE exposure.

UAE banks have posted double-digit losses since the U.S.-Israeli airstrikes against Iran began on February 28.

The conflict has disrupted global energy markets and transport routes and escalated quickly, with Iran launching multiple attacks on Dubai and other Gulf nations. Some banks have temporarily closed branches.

Despite the turmoil, the Central Bank of the UAE said the country’s financial system has shown resilience, with no significant impact on the health of the banking sector or its payment systems.

“Overall, the measures should provide temporary relief and support sentiment in a challenging period,” analysts at Goldman Sachs said in a note.

The relief package, approved Tuesday, includes short-term support for liquidity and stable funding ratios.

It also allows a temporary release of the countercyclical capital buffer and the capital conservation buffer, which are regulatory requirements that banks maintain during periods of high credit growth. These buffers can be used to absorb losses during downturns.

Goldman Sachs noted that temporarily lifting these buffers could increase banks’ capital by up to 3 percentage points, giving lenders more flexibility to extend loans and handle potential credit deterioration.

Banks in the Gulf have benefited in recent years from growing demand for credit as governments invest to diversify economies away from oil.

While the current measures are larger than those used during COVID-19, Goldman Sachs warned that asset-quality risks may appear if the conflict continues and economic effects intensify.

S&P Global Ratings said Gulf banks could see domestic deposit outflows of $307 billion if the Middle East conflict escalates, but the agency added that there is currently no sign of significant withdrawals of foreign or local funding.

The Central Bank of the UAE stated that the total liquidity held by banks, combined with their net eligible assets for central bank operations, is nearly $250 billion, with reserve balances exceeding $109 billion.

Jefferies noted that recent metrics show no significant stress and that the new measures remain preventive, providing UAE banks with up to $58.3 billion in liquidity access.

The central bank and other Gulf authorities may announce additional measures after the U.S. Federal Reserve issues its interest rate decision Wednesday. The Fed’s meeting comes as the war drives oil prices above $100 a barrel, a key inflation factor.

Most Gulf Cooperation Council countries link their currencies to the U.S. dollar, meaning they often follow U.S. rate decisions. Kuwait is an exception, pegging its dinar to a basket of currencies that includes the dollar.

The Central Bank of the UAE said on Wednesday it will keep the Base Rate for the Overnight Deposit Facility at 3.65 percent.

The decision follows the U.S. Federal Reserve’s announcement to hold the Interest Rate on Reserve Balances steady.

The central bank also confirmed that the rate for borrowing short-term liquidity from the CBUAE will remain 50 basis points above the Base Rate for all standing credit facilities.

Tensions in the region have risen since the U.S. and Israel carried out joint airstrikes on Iran on February 28, 2026.

Iran responded with hundreds of missile and drone attacks targeting airports,, seaports, hotels, residential areas, and oil facilities in Dubai and Abu Dhabi, according to reports.

(With files from Reuters | WAM)