Moody's Ratings on Friday affirmed the United Arab Emirates' long-term local and foreign currency issuer ratings at Aa2 and maintained a stable outlook, even as the Strait of Hormuz has been effectively closed since early March. The ratings agency also confirmed the foreign currency senior unsecured debt rating at Aa2 and the medium-term note program rating at (P)Aa2.
The ratings decision, Moody's said, rests on several enduring strengths. The UAE benefits from high income per capita, a diversified economic structure, and robust institutions, while the federal government carries a very low debt burden. Those strengths, however, are set against heightened regional geopolitical risks arising from the ongoing Middle East conflict, a relatively high reliance on hydrocarbons and identified shortcomings in disclosure.
Moody's assessment assumes full financial support from the government of Abu Dhabi, which itself carries an Aa2 stable rating. The agency noted that Abu Dhabi's government financial assets exceeded 300% of its GDP at the end of 2025, forming a key pillar of the federal safety net.
On the economic outlook, Moody's expects real GDP to decline by about 7% in 2026. The agency attributes that contraction primarily to a 23% drop in hydrocarbon production and a 4% contraction in the non-hydrocarbon sector. To partially offset the loss in export volumes, Moody's projects oil prices averaging between $90 and $110 per barrel in 2026 and expects continued flows through the Habshan-Fujairah pipeline will help mitigate some export disruption.
Looking beyond 2026, Moody's anticipates a substantial rebound in real growth of 13% in 2027. That recovery is expected to be driven by a resumption of trade flows through the Strait of Hormuz and an 8% recovery in the non-hydrocarbon sector, according to the agency's projections.
Moody's highlighted the federal government's relatively strong fiscal starting point entering the crisis. In 2025 the federal government recorded a surplus equivalent to 0.8% of UAE GDP. The ratings agency now expects only a modest deficit in the near term, with federal debt remaining very low at roughly 3-4% of GDP.
Fiscal and financial buffers underpinning Moody's view include substantial fiscal reserves, access to the Emirates Investment Authority and support from the UAE Supreme Council. These elements, the agency said, contribute to the stable outlook by enhancing the federal government's capacity to withstand regional stress.
Moody's set out scenarios that could change the rating trajectory. Upward pressure on the rating could materialize if the UAE's resilience to carbon transition scenarios were to increase materially or if regional geopolitical risks eased significantly. Conversely, downward pressure would arise from an escalation of conflict that threatens Abu Dhabi's ability to produce and export oil or from a reduction in Abu Dhabi's willingness or ability to support the federal government.
Key takeaways
- Moody's affirmed the UAE's Aa2 long-term local and foreign currency issuer ratings and maintained a stable outlook while also confirming senior unsecured and MTN program ratings.
- The affirmation balances strong fiscal and institutional credentials - including Abu Dhabi's financial assets exceeding 300% of its GDP at end-2025 - against elevated geopolitical risk and hydrocarbon dependence.
- Economic forecasts include an expected real GDP contraction of about 7% in 2026, driven mainly by a 23% fall in hydrocarbon output, with a projected 13% rebound in 2027 as trade flows normalize.
Impacted sectors
- Hydrocarbons and energy exports - losses in production and export volumes are central to the near-term GDP outlook.
- Non-hydrocarbon domestic sectors - the non-oil sector is also expected to contract in 2026 and plays a role in the 2027 recovery projection.
- Public finance and sovereign borrowing - low federal debt and fiscal reserves are key determinants of the credit assessment.
Risks and uncertainties
- Escalation of regional conflict that threatens Abu Dhabi's oil production or export capability - such an outcome would place downward pressure on the UAE's credit profile.
- Persistent or worsening geopolitical tensions in the region that extend disruptions to trade routes such as the Strait of Hormuz.
- Ongoing reliance on hydrocarbons and limited disclosure practices, which Moody's identifies as constraints on the rating despite fiscal strength.
The ratings agency's view reflects a balance between the UAE's fiscal and institutional strength and the pronounced external risks it faces. Moody's stable outlook signals an expectation that the federal government's buffers and Abu Dhabi's support will keep the country's credit profile resilient while the regional situation evolves.