Asian banks resumed lending to Gulf borrowers in August, participating in financings for which requests totalled more than $6.8 billion, signalling that lenders across the region are prepared to look past the risk posed by the conflict in Iran. Qatar National Bank, Boubyan Bank and the Kuwait Investment Authority, the emirate's sovereign wealth fund, were among the major borrowers that secured funding during the month from Asian banks and other lenders. It remains unclear how much of the requested total will ultimately be provided. Separately, Saudi Energy Co, the state-owned utility formerly known as Saudi Electricity, has been in talks for a $300 million loan expected to be anchored by a major Chinese lender, according to a document seen by Bloomberg.
The renewed activity follows a near-total freeze in Gulf syndicated lending that took hold after the United States-Israel war on Iran broke out, halting what many Asian institutions had identified as their next significant growth market. Asian banks were the largest source of financing in the Gulf last year, with the bulk of the money directed to Saudi Arabia and the United Arab Emirates. The region drew more than $17 billion from Asian lenders over that period, a record high and triple the volume recorded in 2024, according to data compiled by Bloomberg. That trajectory was interrupted abruptly when hostilities began, leaving mandated deals suspended and pipelines emptied.
CAPITAL SEEKING DEPLOYMENT
The return to the Gulf is being driven as much by conditions in Asia as by any improvement in the regional risk picture. The syndicated loan market outside Japan is enduring its deepest slump in 16 years, leaving lenders with capital and few opportunities to deploy it. Gulf borrowers, many of them sovereign-linked entities with established relationships and strong credit profiles, represent one of the few available outlets. Bankers in Asia now appear willing to tolerate a degree of exposure to the Iran conflict, particularly as the war has so far stopped short of the worst-case outcomes contemplated when it began.
Relationship considerations are also shaping the decision to re-engage. "Banks will continue to lend, but more cautiously and to selected clients," said Gary Ng, senior economist at Natixis SA. "Banks also have an incentive to protect the relationships they built in the Gulf." Institutions that spent recent years establishing themselves as anchor lenders in Saudi Arabia and the UAE face the prospect of ceding those positions to European, Gulf-based and other rivals if they remain absent for an extended period. Saudi Energy, China Construction Bank and Korea Development Bank did not respond to requests for comment.
VOLUMES REMAIN SHARPLY LOWER
The revival has done little to restore aggregate volumes. Lending extended by Asian banks in the Gulf is down 72% year-to-date at $2.3 billion compared with the same period last year. The composition of individual transactions illustrates the retrenchment. In the Kuwait Investment Authority financing, Asian banks including China Construction Bank and Korea Development Bank accounted for only about 30% of total lending. By contrast, all 34 banks that contributed to last year's $1.5 billion loan to Riyad Bank SJSC were Asian institutions.
Bankers expect Gulf lending to remain constrained in the near term. Financing is being assessed on a case-by-case basis, with internal guidance unchanged from when the conflict started, according to half a dozen bankers familiar with the matter who asked not to be identified because they were discussing internal policies. The pace of recovery will depend on whether the conflict remains contained and on the trajectory of shipping and energy flows through the Strait of Hormuz, which continue to influence pricing across the region. "Syndicated loan growth may pick up, but it won't return to previous levels until stability returns," Ng said.