UAE Seeks US Financial Backstop as War Threatens Economy

The United Arab Emirates is turning to the United States for potential financial support as regional war risks begin to rattle its economy and currency, The Wall Street Journal reports, citing U.S. officials.

UAE Central Bank Governor Khaled Mohamed Balama discussed the possibility of a currency swap line during meetings last week in Washington with Treasury Secretary Scott Bessent and senior officials from the Treasury Department and Federal Reserve, according to individuals familiar with the talks.

The Gulf state is concerned that the conflict involving Iran could deal serious damage to its economy, disrupt oil flows, and shake its standing as a key global financial hub.

Finance ministers and central bankers gathered in Washington for the IMF and World Bank meetings warned that the region faces a slow, uneven recovery, a view echoed by S&P, which has cautioned that prolonged conflict could weigh on growth and strain financial stability.

Access to U.S. dollars is critical in times of stress. Emirati officials have floated options like currency swap lines — tools the Fed has used in past crises to provide emergency dollar funding to allies.

While no deal is in place, the talks signal rising concern about a potential liquidity squeeze if the conflict drags on.

In a worst-case scenario, officials of the oil-rich nation have warned that the U.A.E. could be pushed to use other currencies, including China’s yuan, for some transactions — an outcome that could chip away at the dollar’s dominance in global oil trade.

The war has already hit key parts of the economy. Damage to energy infrastructure and shipping disruptions near the Strait of Hormuz have cut into oil revenues.

At the same time, the U.A.E. has raised billions from investors in recent days to boost cash reserves, underscoring the need to stay liquid as uncertainty grows.

Despite still benefiting from high oil prices, officials are increasingly focused on protecting investor confidence and financial stability.

For now, the U.S. remains the financial safety net.

The Federal Reserve has extended dollar lifelines to select countries during past crises, while the Treasury has also stepped in with support programs when needed.

Nations without direct swap-line access to the Federal Reserve can still obtain dollars by converting their U.S. Treasury holdings through a facility run by the New York Fed.

The outreach highlights a broader shift: as risks rise, the United Arab Emirates is leaning more heavily on Washington to help steady its economy — and its currency.