UAE: GDP growth hits four-year high in Q4 before Iran war
GDP growth hits four-year high in Q4: The UAE’s GDP increased 8.5% on a year-on-year basis in Q4 2025, following a 7.1% expansion in the previous quarter and marking the strongest result since Q1 2022. This marks the last quarter of data before the Iran war broke out.
Both hydrocarbon and non-hydrocarbon sectors bolster GDP growth: Compared to the prior quarter, readings in Q4 improved for both the oil-and-gas sector (+9.9% in year-on-year terms vs +7.0% in Q3) and the non-oil-and-gas sector (+8.1% yoy vs +7.2% in Q3).
The result for the oil-and-gas sector—the strongest in over three years—came as OPEC+ continued to ease production constraints and raise the UAE’s output allowance, supported by the country’s expanded production capacity. Meanwhile, the result for the non-oil-and-gas sector—a one-year high—reflected robust activity in wholesale and retail trade, construction, manufacturing, logistics, financial services and real estate, underpinned by the government’s ongoing efforts to diversify the economy away from oil.
Panelist insight: Examining the impact of the U.S.-Iran war on the UAE, economists at the EIU said:
“As a result of the more protracted disruption to oil production and other major economic sectors, we have further downgraded our forecast for economic performance in 2026 to a 2.5% contraction (from a 1.5% decline previously), but we expect a slightly stronger uptick in 2027, of 6.7% growth that we did previously (6.5% expansion) as the departure from OPEC removes production constraints and supportive policies and heavy investment enable a rapid recovery in performance.”
Analysts at S&P Global Ratings commented:
“Trade disruptions and security risks may persist, weakening both oil and non-oil economic activity. We estimate that real GDP will contract by 2.7% in 2026, after 6.2% growth in 2025. Given our base-case scenario that disruptions in the Strait of Hormuz will ease in the second half of 2026, we forecast that full-year oil production will average 2.5 million-2.6 million barrels per day (mbpd) in 2026, down from 3.14 mbpd in 2025. The war has had negative implications for the tourism, manufacturing, trade, construction, and real estate sectors, which together contribute about 45% to the UAE’s real GDP.”