Non-Oil Business Growth Slows in UAE, Kuwait, and Egypt Amid Regional Tensions

Non-oil business growth slowed across the United Arab Emirates, Kuwait, and Egypt in March as the ongoing conflict in Iran disrupted trade, reduced demand, and increased costs, according to data from S&P Global.

The UAE’s Purchasing Managers’ Index (PMI) eased to 52.9 in March from 55 in February, marking its lowest level since July 2025, though it remained in expansion territory. Kuwait’s PMI fell sharply to 46.3 from 54.5, slipping into contraction for the first time in over a year. Egypt’s index declined to 48 from 48.9, its lowest level in nearly two years. A PMI reading above 50 signals growth, while a figure below 50 indicates contraction.

The slowdown coincides with escalating regional tensions following the outbreak of war involving the US and Israel against Iran in late February. The conflict has disrupted shipping and flight routes, contributing to uncertainty across Gulf economies.

Andrew Harker, economics director at S&P Global Market Intelligence, said the Kuwait PMI “provides a clear indication of the impact of the war in the region on non-oil businesses during March.” He added that firms reported suspensions of flights and shipping as key factors behind reduced new orders and business activity, prompting many companies to limit hiring and purchases.

Kuwait’s non-oil sector recorded its first decline in output and new orders in 38 months, with the pace of contraction the sharpest since May 2021. Export demand weakened as firms faced difficulties securing international business amid the conflict. Falling workloads led to a reduction in employment for the first time in just over a year, marking the sharpest drop since July 2022. Businesses in Kuwait signalled a pessimistic outlook for the first time in 26 months, though some remained hopeful due to aggressive marketing and competitive pricing strategies.

In Egypt, non-oil firms experienced a sharper contraction in business conditions, driven by weaker demand and rising input costs linked to the regional conflict. New orders fell at the fastest pace recorded in the survey’s history, while firms expressed pessimism about future output for the first time. Rising material costs, especially fuel, contributed to a steep increase in input costs—the sharpest since the end of 2024—and prompted the largest rise in output prices in ten months.

David Owen, senior economist at S&P Global Market Intelligence, noted that while Egypt’s PMI fell to a 23-month low, the figure of 48 still corresponds to an annual GDP growth rate of around 4.3 percent. He added that stronger readings earlier in the first quarter suggest that the domestic non-oil sector remains on a solid growth path.

Survey data showed that inflationary pressures accelerated in Egypt during March, with firms citing higher fuel prices and a strengthening US dollar as key factors. Expectations for future activity in Egypt’s non-oil sector slipped into negative territory for the first time, although pessimism remained mild, with only a few respondents attributing the outlook to regional conflict.