Saudi Arabia-UAE Tensions Put Middle East Businesses on Edge

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(Bloomberg) — Middle East businesses are watching tensions between Saudi Arabia and the United Arab Emirates with increasing nervousness, concerned it could impact commerce at a time when both nations are emerging as powerhouses of regional trade and finance.

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Those tensions erupted into the open in December when the kingdom gave UAE forces 24 hours to withdraw from Yemen, and Saudi media has since ramped up rhetoric against its eastern neighbor.

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While no formal diplomatic or commercial measures have been taken, some companies operating in both countries have begun contingency planning to ensure business continuity should the situation escalate further, according to people familiar with the matter, who requested anonymity in order to discuss private deliberations.

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For international firms and investors, the situation is evoking memories of the more than three-year blockade of Qatar — imposed by Saudi Arabia, the UAE, Bahrain and Egypt — that began in 2017 and disrupted regional supply chains. Adding to their anxiety about regional stability, President Donald Trump said last week that an “armada” of US Navy vessels was heading to the Middle East as he continues to threaten Iran with strikes.

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“At this stage, companies are not reacting operationally; they are asking baseline questions,” said Hussein Nasser-Eddin, chief executive officer of Dubai-based security services provider Crownox. “Most inquiries focus on financial resilience in case of escalation and whether there are any early diplomatic or consular shifts.”

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Some UAE-based firms have reported problems securing Saudi business visas, the people said. It’s not clear how widespread the issue is or whether it marks a change of policy by the Saudi government, which has been pushing for companies to have their regional headquarters in the kingdom for several years. 

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At least one UAE-based supplier to Saudi Arabia is weighing whether to start building inventory as a cushion, while some funds and companies are evaluating plans to open offices in the kingdom to insulate themselves should there be curbs on cross-border activity, the people said.

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At stake is about $22 billion in trade between the two largest Gulf economies, as well as business confidence as both seek to cement their positions as global finance hubs. Their sovereign wealth funds have become bankers to the world, with significant investments across finance, energy, technology and health care. That’s also led to a growing rivalry, with both vying to become the region’s preeminent business hub for Wall Street giants, hedge funds and asset managers.