Iran War Pushes UAE to Seek US Emergency Dollar Lifeline!

UAE central bank governor Khaled Mohamed Balama raised the issue in Washington during meetings with Treasury Secretary Scott Bessent as well as Treasury and Federal Reserve officials. Emirati officials said the talks were precautionary and that no formal request for support had yet been submitted.

The main option under discussion is a currency swap line, that could help the UAE secure dollar liquidity in a crisis and support the dirham’s peg to the US dollar. Officials are concerned that a prolonged conflict could disrupt oil and tanker flows through the Strait of Hormuz, drain reserves, trigger capital flight and increase market volatility.

The report said Emirati officials also warned that if dollar access tightened, the UAE might need to rely more on the Chinese yuan or other currencies in some oil transactions.

Although the UAE still has strong buffers, including an estimated $270 billion in foreign-currency reserves, officials fear prolonged disruption to exports, infrastructure and investor confidence could hamper them.

Hoever reports are that a federal Reserve swap line would be difficult to secure because the Fed usually reserves such support for central banks whose dollar stress could spill into US financial markets.

Gulf states are already building financial defenses. Abu Dhabi has reportedly raised about $4 billion in private placements, while Bahrain has arranged a roughly $5 billion swap line with the UAE.

What Else

The next question is whether the talks move from contingency planning to a formal US support request. Much of this will depend on whether shipping and energy flows through the Gulf stabilise in the coming weeks. Even with the second round of ceasefire talks scheduled, officials appear to be cautiously prepping for an economic disruption expected to outlast the war itself.