Asian banks are reconsidering their lending strategies in the Middle East due to the escalating Iran war, which has dramatically shifted sentiment from just weeks prior. While an Asia Pacific Loan Market Association (APLMA) conference in Dubai in late January saw significant interest in expanding financing links between Asia and the Middle East, the mood quickly reversed at a subsequent meeting in Hong Kong, where the conflict dominated private conversations among bankers. The war has unsettled global finance and disrupted transportation routes, prompting a reassessment of ambitious plans for the Gulf region.
Asian and Chinese banks had significantly ramped up their exposure, with Asian lenders increasing syndicated loan volumes to the Middle East and North Africa by 12% to approximately $180 billion in 2025, even as Asia-Pacific loan volumes (excluding Japan) fell by about 18%. Chinese banks, in particular, had nearly tripled their lending to the region to a record $15.7 billion in 2025, driven by lower domestic credit demand and intensifying price competition. However, this surge in loans is now under critical scrutiny due to the rising risks.
Several global lenders, including HSBC Holdings and Standard Chartered, have reportedly put some Middle East transactions involving Asian balance sheets on hold. Banks from Japan, Greater China, and Singapore are reviewing their pipelines and existing exposures, with some considering a shift in focus to more stable markets like South Korea and Australia. One major Singaporean bank has already shelved its Middle East expansion plans for 2026. Chinese banks are adopting a more conservative stance, with some even restricting drawdowns on bilateral facilities to financial entities linked to the Abu Dhabi government and requiring daily updates on regional risks. Taiwanese banks, previously aggressive lenders, have effectively stopped taking new exposure to Gulf borrowers.
