إنت عربي
With shifts brought on by conflict in Iran, the focus often falls on territory and energy markets. Still, beneath the surface reports, another progression moves forward, tying closely to how banks function, and to how they develop their capacity to absorb shocks.
From a banking and finance lens, how does the Iran war environment translate into real business risk?
The instinct is to look at oil prices and stop there. But if you’ve spent enough time in banking, you learn quickly that a big part of the story sits in transportation channels. Take the Strait of Hormuz, for instance. When transportation through it tightens, liquidity tightens concurrently. However, it is not always as immediate or as visible. Trade flows get disrupted, yes, but more importantly, the cost of facilitating those flows rises. Trade becomes more expensive, and insurance margins widen. That’s the part many underestimate. Trade doesn’t stop, but it becomes heavier, slower, and more expensive to carry.
Where do you see the biggest blind spot for corporate leaders today?
They’re still limit their focus on operational disruption when they should also be thinking in terms of balance sheet pressure. Inflation is a financing issue. As it rises, central banks are pushed toward further tightening. And once rates move up, the entire cost of capital shifts. In banking, we always stress test for this. What happens if your borrowing cost increases by 200 basis points? What happens if your receivables take 15 days longer to convert? Individually, these could be manageable. Together, they start to erode resilience.
How are banks themselves reacting in this kind of environment?
Banks by nature recalibrate. Risk models become more conservative, and credit committees tend to ask tougher questions. Within this scenery, sectors are re-classified quietly, from ‘stable’ to ‘watchlist’, and from ‘growth’ to ‘selective’. And this is systemic. Even very strong companies will feel it. Facilities may still be available, but pricing shifts and covenants tighten. In some cases, undrawn lines, which companies often treat as a safety net, suddenly come with a cost attached or get reduced. If you’ve sat on both sides of the table, you can see it coming.
Given that reality, what should CEOs and CFOs anchor on right now?
I believe it should be liquidity, not market share, not growth narratives, not even profitability in the short term. In banking, there’s a discipline we apply almost instinctively. It says that survival must come first. Optimization follows. The companies that endure shocks are not always the most profitable, but they’re the ones with the strongest control over their cash position. I’ve seen businesses with healthy P&Ls struggle simply because their cash conversion cycle was too loose. And I’ve seen others with thinner margins navigate crises well because they were disciplined with cash every single day.
Let’s talk about cost control. What does ‘good discipline’ look like from your perspective?
One thing is clear: Timing matters more than slashing. Each expense should be examined, piece by piece. Does this keep things running or guard income? When the answer is no, it should be considered for a cut. Deep cuts don’t necessarily fix it. It isn’t one big move that makes a difference. It is rather hundreds of tiny choices that do the job instead. Pausing agreements here, adjusting terms there, each step adds up. Time stretched further because of better negotiation. The outcome would be a few extra months of breathing room, nothing more.
How should companies think about working capital in this context?
Working capital becomes your first line of defense. From a banking standpoint, we often look at the cash conversion cycle as a proxy for discipline. And in times like these, it’s one of the few levers that management can actively control. Stretching payables, carefully and respectfully, keeps liquidity within the business. Tightening receivables improves visibility and reduces uncertainty. Neither is new, but both require a level of engagement many companies don’t maintain in normal times. This is where finance teams need to step forward.
IMF official Jihad Azour recently emphasized that Saudi Arabia has strong financial buffers to confront the impact of the war on Iran. From your perspective, does this mean the Kingdom can absorb the shock, or is there a more strategic way to deploy that strength?
Having strong buffers is about choosing how to respond to shocks. Saudi Arabia today is in a very different position compared to past cycles. Between its fiscal reserves, sovereign assets, and the structural reforms under Vision 2030, it has built a sturdy balance sheet. But the real opportunity lies in using those buffers to support its plans. In finance, when you have liquidity during a period of stress, you gain optionality. You can continue investing when others are pulling back. You can support key sectors and accelerate parts of your strategy that are counter-cyclical. During tighter global cycles, institutions and countries that emerge stronger are the ones that remain active, while others become defensive. Of course, discipline still matters because buffers are not infinite, and the duration of the conflict is a key variable. But Saudi Arabia has something quite powerful right now, which is the ability to pace itself. It doesn’t need to overreact. It can adjust spending, prioritize high-impact projects, and continue building its non-oil economy even under pressure.
Fitch notes that most GCC sovereign funds have so far shown resilience to the Iran war, with no immediate rating downgrades. From your perspective, is this resilience structural, or are markets underpricing the risks ahead?
I think it’s a bit of both, and that’s where the nuance lies. On the structural side, the resilience is real. GCC sovereigns today are not what they were 10 or 15 years ago. They’re sitting on stronger fiscal buffers, sizable sovereign assets, and – critically – credible access to capital markets. That’s why, as Fitch highlighted, we haven’t seen rating actions despite the ongoing conflict. But if you look at it through a banker’s lens, resilience doesn’t mean immunity. What markets are pricing today is largely a short-duration shock. Liquidity is still available, investor confidence is holding, and balance sheets, at the sovereign level, can absorb the initial hit. But I think we must not underestimate what happens if this drags on. Because the pressure doesn’t show up first in ratings, it shows up in the system’s operational mechanism. Funding costs start to creep up, and investor selectivity increases. Non-oil sectors begin to slow, which matters more today than ever, given diversification agendas. Even Fitch itself points to operating conditions and confidence as key variables to watch for banks and sovereigns alike. I wouldn’t say risks are being ignored, but they may be deferred. The first phase of a shock tests your buffers, the second phase tests your model. The GCC is passing the first test comfortably. The second one will depend entirely on duration and on how effectively governments manage liquidity, confidence, and fiscal discipline over time.
Some international commentary suggests Saudi Arabia may be forced to scale back its global ambitions and spending plans as the Iran war disrupts trade and finances. Do you see this as a retreat or a strategic reset?
It feels less like stepping back and more like resetting direction. Pressure indeed exists, especially as conflict twisted oil routes, lifted expenses, and made leaders reevaluate budgets. Some plans now face second looks and shifting schedules; this is expected after such a jolt. Here’s the thing: Solid structures respond similarly when pressure hits. Instead of pushing forward without thought, they shift direction. Choices tighten and focus sharpens. Yet, that shift opens doors. Once money moves with purpose, what gets funded usually gets better. Put differently, the focus moves toward efficiency instead of relying on plenty. Still, Saudi Arabia holds solid financial safeguards, extra paths for exports, while its long-term plan stays, just sharper now.
Inventory decisions can be tricky in volatile markets. How would you frame it?
I think of inventory as trapped liquidity with optionality. From a finance perspective, excess inventory is inefficient as it ties up cash and carries risk. But in a disrupted supply environment, understocking can be even more costly. So, think where do you want to hold your risk? In cash, or in continuity? There’s no universal answer, but the decision should be deliberate. Focus on critical inputs, long lead times, and areas where substitution is difficult. That’s where a slightly higher buffer makes financial sense.
How aggressively should companies reassess their customers?
More actively than they’re comfortable with. In banking, credit risk is never static and must be continuously reassessed. Companies need to adopt a similar mindset, especially now. A customer’s payment behavior is one of the earliest indicators of stress. If you ignore it, you’re effectively extending unsecured financing without realizing it. This doesn’t mean pulling back indiscriminately. It means segmenting your customers, understanding their exposure, and adjusting terms where necessary. Quietly, pragmatically.
Is this a moment for strategic expansion or caution?
If your expansion relies on investments that you can’t confidently underwrite, it’s probably the wrong time. In finance, we’re trained to distinguish between risk we understand and risk we don’t. The current environment is full of the latter. The more strategic path is to deepen your position in areas you already understand well.
Finally, what role do banking relationships play in navigating this period?
A central one, maybe even more than one could imagine. In stressed environments, access matters as much as cost. And access is built on trust, history, and transparency. I’ve seen clients approach banks only when they need something urgently. That’s a mistake. The strongest relationships are continuous, not transactional.
