Bank lending in the UAE is becoming more cautious as the Iran crisis continues far into the third month. Industry leaders have seen tighter underwriting standards and slower new disbursements due to growing concern.
Approvals for new credit, particularly in real estate, construction, manufacturing, hospitality, and logistics, have grown more difficult to get despite growing risks, according to firms, even though current loans and ongoing projects are mostly unaffected.
The change highlights a more cautious and defensive approach by lenders in reaction to geopolitical unpredictability, even if the UAE banking sector is still lucrative and well-capitalized. The significant increase in provisioning in the first quarter, as banks set aside buffers against possible stress, is another indication of the concern.

According to data gathered by the digital business lending technology platform Biz2X, lending at some big banks has decreased by as much as 85–90% in certain instances. "Bank lending in the UAE market is going through a visible reset, with banks taking a harder look at fresh disbursements, sector exposure, and borrower quality," stated Rohit Arora, CEO and co-founder of Biz2X and Biz2Credit. He gave the example of a large UAE bank that normally disburses about AED 209 million each month, but last month saw flows drop to roughly AED 30–40 million.
"Policies have tightened, approvals are taking longer, and banks are leaning towards fewer, better-understood sectors," Arora added.According to him, risk assessments are becoming more cautious even in relatively defensive industries like healthcare.

Industry leaders noted that some companies, particularly those in capital-intensive industries, are being forced to look for funding from private lending companies at much higher borrowing prices due to a halt in bank financing.New disbursements have been halted by some banks. New business lending, especially to real estate and construction, has essentially stopped, even while current activity is still ongoing. According to Amit Goenka, chairman and managing director of Nisus Finance, "even some of the biggest private players in the nation are turning to expensive private lenders as liquidity from both sales and banks dries up.""Zero approvals for projects, whether finished or under construction, and no new exposure across sectors have been the message in recent internal discussions," he continued.

Goneka highlighted that the caution is due to the current environment's challenges in evaluating cash flows and asset valuations. "It is difficult to predict if assets will sell, at what price, and how revenues will change. According to qualifying reports from valuers themselves, valuations may change in a few of months, he stated. Nisus Finance initiated a $500 million August 2024 saw the establishment of a Gulf-focused real estate fund in Dubai, which has made investments in important municipal assets.
According to a recent research by Oxford Economics, the Banking Sector Risk Tool indicates that overall risk is still low, but rising private credit growth is still a concern.

The founder and CEO of Northstar Insights, Arth Malani, agreed that banks are responding with longer turnaround times, tighter covenants, and higher collateral demands because cash flow visibility in industries like real estate, manufacturing, hospitality, aviation, and trade-linked businesses has weakened. Due to the war, UAE banks increased provisioning in Q1 as a precaution, reporting a 52–68% year-over-year increase in net impairment costs.