UAE non-oil sector records fastest growth since 2024 despite regional conflict

According to an S&P Global report, the UAE's Purchasing Managers' Index (PMI) climbed to 55.3 in August, up from 52.7 in July. A reading above 50 indicates economic growth. David Owen, principal economist at S&P Global Market Intelligence, stated that the UAE's non-oil economy has shifted into a higher gear, with firms adapting more effectively to the current market environment.

The report attributes this growth to rising demand, improved delivery times, and softened cost pressures. UAE businesses are actively building supply chain resilience by switching to domestic suppliers to circumvent geopolitical disruptions. Inventories at non-oil companies also accumulated at the fastest pace in nearly three years, reflecting growing confidence in the demand outlook.

However, regional tensions stemming from the conflict that began on February 28 continue to impact the business climate. Iranian drone and missile strikes on neighboring countries and the closure of the Strait of Hormuz have affected sectors such as hospitality and aviation. Despite mediated negotiations, no peace deal has been reached to reopen the strait.

S&P Global noted that while economic caution due to the Middle East conflict persists, a relative decrease in attacks during August helped improve customer activity. The return of families from summer holidays and an increase in export demand were also cited as factors supporting the UAE's economic strengthening last month.