Gulf stocks brace for Q2 earnings as Iran war impact hits sectors unevenly

DUBAI: Gulf stock markets are set to face a key test as listed companies begin reporting second-quarter earnings this week, offering the clearest indication yet of how the Iran war has affected corporate performance across the region.

Analysts expect the impact to vary across sectors and countries, with banks, real estate, tourism and consumer-linked businesses more exposed, while energy and telecom companies are expected to show greater resilience.

The first quarter reflected only the early impact of the conflict, which began at the end of February. The second quarter is expected to show the fuller financial effect of the four-month war.

“The second quarter is going to reveal the real impact of the war,” said Tariq Qaqish, deputy CEO at advisory firm FH Capital.

He said the first quarter had shown only the initial pressure on sectors such as tourism and aviation.

The effect on Gulf economies is also expected to differ by geography, depending on their reliance on the Strait of Hormuz.

Saudi Arabia, which also has oil terminals on the Red Sea, is forecast by HSBC to grow 2.1% this year.

Oman’s stock index has also outperformed, supported by the country’s position outside the strait.

By contrast, the UAE, Qatar and Kuwait, which rely more heavily on the shipping channel, are expected to contract.

The Strait of Hormuz remains a key risk factor for the region, particularly after renewed strikes threatened the peace process.

On Wednesday, US President Donald Trump said an interim agreement to end the war with Iran was over after Tehran carried out new attacks on US bases in the Gulf.

Salman Ahmed, Fidelity International’s global head of macro and strategic asset allocation, said some regional risk premium was likely to remain because of Iran’s leverage over the strait.

S&P Global Ratings analysts said a further confidence shock would increase risks for companies exposed to consumer and services demand.

Energy companies faced supply disruptions during the conflict, but higher prices helped offset part of the impact.

HSBC has raised its Brent forecast to $95 a barrel for 2026 and estimates second-quarter average prices at $114.

Saudi Arabia kept exports flowing through the Red Sea, but the UAE’s gas sector was affected.

ADNOC Gas has forecast an around 19% year-on-year decline in domestic gas sales linked to an incident at one of its plants.

Telecom operators are expected to remain broadly resilient because of long-term contracts and relatively stable demand.

Regional operators including Saudi Arabia’s STC and Mobily, and the UAE’s e&, have shown resilience, according to analysts.

Consumer companies are expected to reflect disruption from the conflict, although higher at-home consumption supported some businesses.

Shares in Dubai food delivery firm Talabat have risen by more than 60% over the past three months.

Gulf airline flight volumes have also returned to near-normal levels.

Banks across the region are expected to report single-digit declines in second-quarter profits compared with the previous three months.

Elena Sanchez-Cabezudo, head of financials equity research at EFG Hermes, said the decline reflected lower fee income from weaker trade finance and reduced credit card spending on international travel.

She said the comparison also reflected a strong January and February against a full quarter of conflict in the second quarter.

However, she added that Gulf banks remained resilient because of strong sector liquidity.

S&P Global Ratings said regional lenders had stable funding profiles, but war-related uncertainty was likely to slow growth.

Some UAE banks have attracted deposits by offering higher interest rates to new savers.

Real estate markets, particularly in the UAE, are also showing signs of pressure after a years-long boom.

Analysts have warned that prolonged tensions could affect expatriate inflows and tourism-linked demand.

Some developers have moved to preserve liquidity by reducing or delaying dividend payouts.

Citi said Dubai residential sales in the second quarter were significantly below pre-conflict levels, while Abu Dhabi also saw a decline, though less severe.

Major developers in the region include Emaar Properties and Aldar Properties.

Francesc Balcells, chief investment officer for emerging market debt at FIM Partners, said some real estate developers were lagging, but regional credit spreads had largely returned to normal.

He said the issue was mainly about balance sheets, adding that many companies had strong enough balance sheets to withstand large shocks.