UAE: GDP growth hits three-year high in Q3, but Iran war threatens outlook
GDP growth accelerates sharply in Q3: The UAE’s GDP increased 6.8% on a year-on-year basis in Q3, following a 4.5% expansion in the previous quarter and marking the best result in three years.
Hydrocarbon and non-hydrocarbon sectors drive GDP growth: Compared to the prior quarter, readings in Q3 improved for both the oil-and-gas sector (+6.5% in year-on-year terms vs -0.5% in Q2) and the non-oil-and-gas sector (+7.0% vs 6.1% in Q2).
The result for the oil-and-gas sector—the best in three years—came as OPEC+ loosened quotas and boosted the UAE’s allowed output, in part due to greater pressure from the country stemming from its improved production capacity. Meanwhile, the result for the non-oil-and-gas sector—the best in just under two years—was driven by stronger output in construction, manufacturing, logistics, financial services and real estate, boosted by the government’s push to diversify the economy away from oil.
Panelist insight: On the potential impact of the Iran war on GDP growth, Goldman Sachs economists commented:
“We estimate the impact on output this year (in both the oil and non-oil economy) in a downside scenario where the conflict continues at its current level of intensity until the end of April […]. Mapping the losses to non-oil GDP across to total GDP and adding the impact of a decline in oil sector output, we estimate […] the total potential contraction in real GDP […] the UAE could see a contraction of around 5%.”
On the same topic, analysts at Fitch Solutions said:
“In light of the US-Iran war and its spillover effects into the UAE, we revised down our 2026 growth forecast for the UAE from 5.6% to 5.0% […]. The UAE was among the countries most targeted by Iran’s retaliation, with strikes on US bases, residential buildings, hotels, Dubai International Airport, Jebel Ali Port and other key economic hubs. Our downward revision reflects the disruption to key sectors such as trade, logistics, travel and tourism, financial services, technology and other services sectors — services account for more than 50% of GDP. Our Oil & Gas team continue to believe that any near-term disruption to oil and gas output and flows will be offset later in the year. We have therefore maintained our 2026 forecast for hydrocarbon sector growth. That said, risks are significantly skewed to the downside, including the war dragging beyond four weeks or more consequential reductions in oil production or outages.”