The UAE Remains Vulnerable to Escalating Regional Geopolitical Tensions

Despite the strength and diversification of its economy, the UAE remains vulnerable to the repercussions of escalating regional geopolitical tensions, particularly given its pivotal geographical location in the Arabian Gulf and its close link to international maritime trade routes.

Any escalation in the Gulf region threatens direct economic repercussions for the UAE, including rising maritime shipping insurance premiums, a decline in tourism, and a contraction of foreign direct investment flows, especially if oil tankers face threats in the Strait of Hormuz.

The UAE adopts a pragmatic foreign policy through which it seeks to strengthen its network of international relations and diversify its security partnerships as a means to neutralize geopolitical risks and secure the continuity of trade flow.

Risk experts indicate that any outbreak of severe regional events could cost the UAE between 0.5% and 1.5% of its GDP in the first year, through reduced tourism and higher insurance and shipping costs.

What do these terms mean?

Geopolitics: A study of how geographical locations and natural resources affect countries' decisions, foreign policies, and alliances; for example, the UAE's location adjacent to Iran and its proximity to the Strait of Hormuz make it a sensitive point in geopolitical equations.

Strait of Hormuz: A narrow waterway separating the Arabian Gulf and the Gulf of Oman, through which about 20% of global oil supplies pass; any closure of it means a sharp rise in oil prices worldwide.

Shipping insurance premiums: These are the amounts paid by shipping companies to insure their goods and vessels against risks, and they rise significantly in tension zones, which increases cargo transportation costs and raises product prices.