RIYADH: Non-oil business growth slowed across the UAE, Kuwait and Egypt in March as the Iran conflict disrupted trade, dampened demand and increased costs, S&P Global data showed.
The UAE’s PMI eased to 52.9 in March from 55 in February, its lowest level since July 2025, though it remained in expansion territory. Kuwait saw a sharper deterioration, with its PMI falling 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, marking its lowest level in nearly two years.
A PMI reading above 50 signals expansion, while a figure below that threshold indicates contraction.
The broad-based slowdown comes amid escalating regional tensions following the outbreak of war involving the US and Israel against Iran in late February, which has disrupted flights and shipping routes and heightened uncertainty across Gulf economies.
Andrew Harker, economics director at S&P Global Market Intelligence, said: “The S&P Global Kuwait PMI provides a clear indication of the impact of the war in the region on non-oil businesses during March.”
He added: “Companies reported that the suspension of flights and shipping were key factors leading to reduced new orders and business activity, with firms responding by limiting their employment and purchasing.”
Survey data showed Kuwait’s non-oil firms recorded their first decline in output and new orders in 38 months, with the pace of contraction the sharpest since May 2021. Export demand also weakened, as companies cited difficulties in securing international business amid the conflict.
Alongside the decline in total new orders, new business from abroad also fell, with companies citing their inability to receive international business amid the war.
Falling workloads prompted companies in Kuwait to reduce employment for the first time in just over a year, with staffing levels seeing a slight but the sharpest decline since July 2022.
Non-oil business firms in Kuwait signalled a pessimistic outlook for the first time in 26 months, although some firms remained optimistic about growth thanks to aggressive marketing plans and competitive pricing strategies.
“There were also concerns about the impact of the war on output in the months ahead, with business conditions for Kuwaiti firms largely dependent on how long the conflict persists,” Harker concluded.
Egypt PMI
In Egypt, non-oil firms reported a sharper contraction in business conditions, driven by weaker demand and rising input costs linked to the regional conflict. New orders fell at a faster pace, while firms turned pessimistic about future output for the first time since the survey began.
Higher material prices linked to the war drove a steep rise in input costs among Egyptian non-oil companies in March, with firms reporting the sharpest increase since the end of 2024. As a result, output prices were raised at the strongest pace in ten months.
“While the Egypt PMI fell to a 23-month low and panel members signalled that the Middle East war had weakened demand, the latest figure of 48 still relates to annual gross domestic product growth of around 4.3 percent,” said David Owen, senior economist at S&P Global Market Intelligence.
He added: “Combined with stronger PMI readings earlier in the first quarter, recent data suggest the domestic non-oil sector is on a solid underlying growth path.”
According to the survey, businesses experienced a sharp increase in average purchase prices during March, with the inflation rate accelerating to one of the strongest levels in around one-and-a-half years.
Firms commonly mentioned rises in the price of fuel and other inputs linked to the conflict, alongside a strengthening of the US dollar.
“As the US dollar strengthens amid a flight to safety, and energy prices remain elevated, Egyptian companies are clearly feeling the impact on their balance sheets,” concluded Owen.
Expectations for future activity in Egypt’s non-oil private sector slipped into negative territory in March for the first time in the survey’s history, with firms predicting a decline in output over the next 12 months.
However, the degree of pessimism remained mild, as only a few respondents cited uncertainty surrounding the regional war as the reason for their negative forecasts.
