WASHINGTON: The United Arab Emirates has opened preliminary discussions with U.S. authorities about securing a financial safety net should the ongoing war with Iran deepen economic pressures on the Gulf state, U.S. officials said, underscoring growing Emirati anxiety over the conflict’s toll on one of the world’s wealthiest economies.
According to a report published in Wall Street Journal, UAE Central Bank Governor Khaled Mohamed Balama raised the prospect of a currency-swap line with Treasury Secretary Scott Bessent, along with Treasury and Federal Reserve officials, during meetings in Washington last week, the officials said. The Emiratis stressed they had so far avoided the worst economic fallout from the conflict but could still require a financial lifeline if conditions deteriorate further.
Emirati officials have not yet filed a formal request for a swap line, the officials added.
MM News adds: The discussions highlight how even fiscally robust states can face acute liquidity pressures during major geopolitical shocks — drawing comparisons to the dollar squeezes experienced by advanced economies during the 2008 financial crisis and the COVID-19 pandemic.
The war, which escalated following a U.S.-Israeli military campaign against Iran beginning February 28, has inflicted tangible damage on UAE energy infrastructure and disrupted oil shipments through the Strait of Hormuz — a critical artery for global energy trade and a vital source of dollar income for Gulf states.
Speaking on ABC’s This Week on Sunday, Reem Al Hashimy, UAE Minister of State for International Cooperation, said the country had been struck by more than 2,800 missiles and drones since hostilities began.
The UAE dirham’s peg to the U.S. dollar makes uninterrupted access to dollar liquidity structurally essential. A Fed swap line — a standard precautionary instrument, not a bailout — would allow the UAE Central Bank to temporarily exchange dirhams for dollars at favourable terms, easing any strain on reserves without drawing down sovereign wealth assets.
Interestingly, Middle East analysts are quick to note that the emergency discussions do not unwind the landmark investment commitments secured during President Donald Trump’s Gulf tour in May 2025, which centred on capital flowing into the United States, not the reverse.
During that visit, the UAE pledged $200 billion in new deals and reaffirmed a long-term $1.4 trillion investment commitment spanning artificial intelligence, energy, data centres, aviation, and defence technology. Saudi Arabia separately committed to more than $600 billion in U.S. investments, with total pledges across the UAE, Saudi Arabia, and Qatar running into the trillions — encompassing sovereign wealth fund allocations, Boeing aircraft orders, semiconductor purchases, and broader infrastructure investments.
“A swap line request and a $1.4 trillion investment pledge are not contradictory — they reflect two different time horizons,” said one analyst familiar with Gulf financial policy. “The long-term strategic partnership remains intact. This is about managing a short-term liquidity stress test.”
Analysts therefore believe U.S. and Emirati officials alike have been careful to frame the swap-line discussions as precautionary, emphasising that the UAE’s financial buffers — including the Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds — remain formidable.
The concerns centre instead on near-term risks: capital flight, rising insurance costs for regional shipping, disruption to trade finance, and the broader reputational threat to the UAE’s standing as a global financial hub should the conflict intensify.
The Federal Reserve has deployed swap lines as an emergency stabilisation tool on multiple occasions, most recently during the COVID-19 pandemic in 2020, when it extended the facility to 14 central banks to prevent dollar shortages from amplifying the global economic shock.
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