Sectors most exposed to risks from the escalating situation around Iran include infrastructure, tourism, aviation and the real estate market, said Redmond Ramsdale, senior director at Fitch Ratings.
Banks in countries of the Gulf Cooperation Council (GCC) are mainly involved in the infrastructure sector through government projects, he said.
"Therefore, such linkage essentially provides banks with a certain level of protection," Ramsdale said adding that while this sector carries risks, it is unlikely to become a source of significant pressure on the banking system.
Tourism and aviation could suffer serious losses if airspace closures persist and security concerns in the region intensify, he added. All GCC countries are rapidly expanding their tourism industries as part of efforts to diversify their economies and reduce reliance on oil.
However, the United Arab Emirates, particularly Dubai, stands out as the most vulnerable, given it has advanced further in developing its tourism sector than other countries in the region. At the same time, Ramsdale noted that tourism represents a relatively small share of banks" loan portfolios.
According to him, existing reserves and other protective mechanisms should help mitigate potential negative effects. Still, if the crisis becomes prolonged, it could gradually affect financial performance.
"The real estate sector is where banks have significantly larger exposure compared with other segments. This is typical for the region. However, the situation varies from country to country," he said.
In Kuwait, risk levels appear lower due to limited housing supply, the absence of large-scale foreign ownership and several other factors, Ramsdale said.
By contrast, the United Arab Emirates may face higher risks as construction activity there has grown at a very rapid pace. A sustained outflow of foreign professionals could put pressure on the market, trigger price corrections and lead to other negative effects, though much will depend on how the conflict develops, he added.