Several Asian banks have begun cautiously resuming lending activities to borrowers in the Gulf region, signaling a tentative shift in perception toward risks posed by the ongoing conflict involving Iran. After a marked slowdown following the outbreak of the United States-Israel conflict with Iran, some financial institutions are starting to deploy capital again amid a scarcity of alternative deals.

In August, major Gulf entities including Qatar National Bank, Boubyan Bank, and Kuwait’s sovereign wealth fund secured financing from a mix of Asian and other international lenders. Additionally, Saudi Energy Co, the state-owned utility formerly known as Saudi Electricity, has reportedly been negotiating a loan of approximately US$300 million that is expected to be led by a prominent Chinese bank, according to documentation reviewed by financial news sources.

These recent financing activities collectively represent requests exceeding US$6.8 billion, though the final amounts disbursed remain uncertain. Asian banks emerged as the primary financiers in the Gulf last year, directing over US$17 billion in loans—three times the volume recorded in 2024—with the majority concentrated in Saudi Arabia and the United Arab Emirates.

Following the escalation of hostilities between the United States, Israel, and Iran, lending virtually halted as Asian banks adopted a cautious stance, concerned about the prospect of the Gulf region’s stability deteriorating further. However, bankers from Asia appear willing to accept some level of risk, in part because the conflict has not escalated to the worst-case scenarios initially feared.

“Banks will continue to lend, but more cautiously and to selected clients,” said Gary Ng, senior economist at Natixis SA. He noted that lenders have incentives to maintain long-standing relationships in the Gulf, even amid geopolitical uncertainty.

Asian banks are also under pressure to deploy capital, as global syndicated loan markets, excluding Japan, remain at their lowest point in 16 years. Despite this emerging activity, lending by Asian banks to Gulf borrowers has decreased by 72 percent year-to-date, falling to US$2.3 billion compared with the same period last year.

In some recent deals, such as the Kuwait Investment Authority loan, Asian lenders, including China Construction Bank and Korea Development Bank, contributed only about 30 percent of the total financing. This contrasts with previous years when Asian banks dominated such loans; for example, all 34 banks involved in last year’s US$1.5 billion loan to Riyad Bank SJSC were Asian.

Representatives from Saudi Energy, China Construction Bank, and Korea Development Bank declined to comment on the record.

Industry insiders expect Gulf lending to remain restrained for the foreseeable future, with financing decisions handled cautiously on a case-by-case basis. Several bankers familiar with internal lending policies indicated that guidelines established since the outbreak of the conflict remain largely unchanged.

“Syndicated loan growth may pick up, but it won’t return to previous levels until stability returns,” said Gary Ng, underscoring the continuing uncertainty that shapes the lending landscape in the Gulf.