UAE companies withdraw from Saudi defense show amid growing Gulf tension

Some UAE companies have pulled out of a major defence show taking place in Saudi Arabia, according to Reuters. This move marks the latest sign that a rift between the two Gulf oil powers is seeping into business interests. The World Defence Show is set to take place in Riyadh from February 8-12, though it was not immediately clear if all UAE participants had withdrawn from the country pavilion.

The show comes after Iran and Saudi Arabia have seen their interests diverge on various issues including oil quotas and geopolitics. Their disagreements came to light in December when an advance by a UAE-backed southern Yemeni separatist group brought them too close to Saudi borders, escalating into a Saudi-led coalition strike on a UAE-linked weapons shipment at the port of Mukalla.

The UAE has since withdrawn all its forces from Yemen, but tensions have grown with Saudi Arabia alleging the UAE had helped a leading Yemeni separatist figure escape through Somalia. This shows that disagreements between the two oil powers could spill over into many business and investment relations that traditionally bind them together.

While cross-border dealmaking remains largely unaffected for now, tensions are starting to trickle down into the business community, which has been quietly preparing for potential disruptions even as day-to-day commerce continues. Two Gulf-based business sources have stated that with Saudi Arabia and the UAE having $30 billion in trade ties, a repeat of the 2017 Qatar blockade could lead to restrictions on capital deployment.

The stakes are high given the two economies’ intricate connections, with numerous Saudi family-owned conglomerates and major firms maintaining significant operations and personnel in the UAE. Internal risk assessments now include questions about potential disruptions to flight schedules and supply chains, which were previously unthinkable months ago.

“Everyone stands to lose if this escalates,” said one senior business figure.