Just days before the United States and Israel launched strikes on Iran, HSBC’s chief executive Georges Elhedery described the Asia-Middle East corridor as "a defining axis of global growth." This week, however, the conflict has begun to intrude on the region-facing operations of two of Britain’s most trade-focused banks: HSBC temporarily closed its Qatar branches, while Standard Chartered evacuated staff from its Dubai office and instructed employees there to work from home.
Those operational disruptions are an early sign of how the hostilities are affecting day-to-day activity and broader ambitions for banks that have made the Gulf a strategic element of their growth plans. Reuters analysis of company disclosures and commentary from sector analysts places HSBC and Standard Chartered among the European lenders most exposed to risks stemming from the war with Iran.
Measured in simple balance-sheet terms, the share of their assets in the Middle East amounts to roughly 2%-3% of global lending for each bank. That percentage, however, masks the strategic role hubs such as Dubai, Riyadh and Abu Dhabi play for banks that focus on trade flows between Asia, the Gulf and other markets.
Market reaction has followed. HSBC shares fell more than 6% on Thursday, taking the total decline since the strikes on Iran on February 28 to 14%. Standard Chartered stock slid about 11.4% over the same interval, compared with a 9.5% drop for the broader STOXX Europe banks index.
Standard Chartered offered a defence of its positioning in the region. "Our network has proven to be adaptable and resilient, allowing us to stay close to our clients, respond quickly to their needs and continue enabling trade, capital, wealth and investment flows across our markets," a spokesperson said.
HSBC pointed to a recent statement by its CEO reaffirming the banks confidence in the Middle East and its longer-term prospects.
Other global banks are also active in the Gulf. JPMorgan and Citigroup have expanded in the United Arab Emirates. JPMorgans exposure in the UAE rose to $5.7 billion between 2024 and 2025, doubling over that span and ranking the UAE eighteenth among the banks top 20 country exposures outside the United States, according to regulatory filings. Citigroups UAE exposure stood at $17.3 billion at the end of 2025, though that stock of exposure has been growing more slowly. Citigroup said on Thursday it would temporarily close most of its UAE branches and financial centres as a precautionary measure.
China-Middle East trade link and bank revenues
Standard Chartered runs its Middle East operations from Dubai, and the UAE has grown in significance for the group. Over the past five years, the banks UAE business increased its share of group income from 3.7% to 5.7%, while that businesss share of group assets has stayed at about 2.4%, according to the banks public statements.
Analysts at JPMorgan on Thursday estimated the Middle East accounted for roughly 8% of Standard Chartereds revenue and about 12% of its profit before tax, while they placed HSBCs Middle Eastern exposure to revenue and profit at around 4%. Those calculations underline why the two banks are seen as the most exposed among European peers to economic disruptions in the region.
Trade flows that connect China and the Middle East are a key underpinning of that exposure. Business volumes between China and the Middle East rose 18% in the last year, Manus Costello, Standard Chartereds global head of investor relations, told Reuters last month. That expansion in inter-regional commerce increases the sensitivity of bank revenues and credit portfolios to disruptions that may follow from the conflict.
Analysts flagged potential knock-on effects on trade finance and credit costs. "We think the increased economic uncertainty could imply some additional risks related to the Groups trade finance and credit costs," said Kathy Chan, an equity analyst at Morningstar.
JPMorgan analysts noted some elements that could blunt the impact of severe credit losses for Standard Chartered. They estimate that 73% of the banks UAE exposure is to government-related entities and banks, a mix that could provide some insulation.
Neither HSBC nor Standard Chartered publishes a line-by-line disclosure of their direct Middle East exposure. Analysts therefore use proxies - Standard Chartereds UAE business and HSBCs Saudi Arabia-based regional entity, HSBC Bank Middle East - to gauge the banks positions in the Gulf.
There are potential revenue offsets as well. Disruption to travel and trade can increase demand for certain banking services, such as foreign exchange and cash management, which could benefit banks that continue to operate in the markets, Hargreaves Lansdown analyst Matt Britzman said.
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For the two British banks, the immediate weeks ahead are likely to test the resilience of their Gulf franchises. While balance-sheet allocations to the Middle East remain a small fraction of total lending, the strategic importance of Gulf financial hubs to their trade-focused business models and the concentration of revenue and profit tied to the region mean that operational disruptions, market repricing and rising credit or trade finance costs could influence results and investor sentiment in the near term.