S&P Global Ratings has outlined a scenario in which banks across the six Gulf Cooperation Council (GCC) countries could face substantial domestic funding withdrawals if the current conflict deepens. In a report published on Monday, the agency said its base case assumes the most intense phase of the war will last two to four weeks, although it acknowledged that spillovers and intermittent security incidents could continue beyond that window.
S&P reported that, to date, it has seen no evidence of major outflows of either foreign or local funding. Nonetheless, the agency warned a prolonged conflict could spark shifts in depositor behaviour - including a flight to quality among banks within the same domestic systems - and broader exits of external and local funding.
Under the ratings agency's hypothetical stress scenario, domestic deposit outflows across the six GCC banking systems could reach $307 billion, measured on a year-end 2025 basis. To put that potential pressure in context, S&P said banks in the region currently hold about $312 billion in cash or deposits at central banks that could be used to absorb withdrawals.
Beyond immediate cash balances, S&P identified an additional liquidity buffer of roughly $630 billion, which it estimated would be available if banks sold down investment portfolios and applied a 20% haircut to those assets. Taking those resources together, the agency concluded that "overall, the risk appears manageable."
The report also highlighted the role of public support and supervision. S&P noted that four of the six GCC countries are considered highly supportive of their banking systems. It added that regional regulators have stepped up supervisory activity since hostilities began, which the agency sees as an important element in mitigating systemic stress.
Contextual takeaways
- The rating agency's scenario is framed around a two- to four-week period of intense conflict, with acknowledgement that disruptions could last longer.
- S&P found no current evidence of major funding outflows, indicating that market reactions so far have been contained.
- Liquidity buffers - both immediate cash and potential proceeds from portfolio sales after a haircut - are sizable relative to the stressed outflow figure.
Implications for markets and policy
S&P's assessment underscores the potential strain on domestic bank funding if conflict conditions worsen, while also pointing to the cushioning effect of cash holdings, liquid securities and strengthened regulatory oversight. The agency's view balances the scale of a possible withdrawal against available buffers and official support, and it stops short of forecasting actual outflows given the absence of current evidence.