APAC lenders hit pause on Middle Eastern loans
The war in the Middle East is starting to give cold feet to Asia Pacific lenders that have powered a surge of loans for Middle Eastern borrowers over the past couple of years, bankers said.
Japanese banks, which had been at the forefront of the trend thanks to cheap, abundant liquidity and a need for higher-margin investment-grade assets overseas, are reassessing their approach. Similarly, some bankers at Hong Kong-based international lenders that had only just begun to participate in Middle Eastern loans given the strong reception for recent deals, said their discussions with borrowers on potential new transactions have now been put on hold.
“Some deals pitched to clients to tap Asian liquidity have paused discussions,” said a loan banker at an international lender.
The Big Four Chinese banks with branches in the Middle East – Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China – may still participate selectively in ongoing loans to maintain key client relationships, but they are also tightening up lending as head offices turn more cautious despite strong political ties between China and Gulf countries.
Some second-tier Chinese lenders are proceeding only with deals that have already cleared internal approvals and are not taking on exposure to any new borrowers, bankers said.
“We are not going to shut the door on lending to Gulf countries, but after a record 2025 we will be tightening concentration limits, shutting out weaker names and only focusing on top-tier financial institutions,” said a Hong Kong-based senior loan banker. “It is likely that the deals in the market might end up with greater reliance on club formats instead of widely syndicated loans."
Taiwanese banks, which had been writing chunky tickets for Middle Eastern assets in recent years, have taken an even more conservative stance and halted new exposure altogether, according to bankers.
Many are prepared to walk away from transactions, even where internal credit approvals were obtained before the conflict, as cultivating client relationships in the region is not seen as a strategic priority. That leaves arrangers of Middle Eastern loans with a much smaller pool of Asian buy-and-hold lenders.
Record volumes
The pullback marks a sharp reversal from the past two years in which Middle Eastern borrowers increasingly diversified funding away from their home markets, underpinned by stable liquidity from Chinese and Taiwanese banks and pockets of fresh demand from Japan.
In 2024 and 2025, Middle Eastern credits raised over US$35bn from the Asian loan market, more than half the US$67.54bn in volumes they borrowed in the past two decades, according to LSEG LPC data. Such borrowing activity only really picked up steam after the pandemic, skyrocketing to US$10.58bn from 17 deals in 2024 and more than doubling from that to a record US$25.05bn from 23 transactions in 2025.
Last year, several jumbo loans for Middle Eastern borrowers drew Asian lenders in hordes as the quality of the credits and attractive pricing provided a welcome diversification from exposure to Asia Pacific.
For instance, state-owned Abu Dhabi Developmental Holding (ADQ) increased a three and five-year term loan to US$5bn from US$4bn after attracting 33 banks in general syndication.
The momentum carried over into this year with Emirates NBD Bank increasing a seven-year loan to US$750m from US$700m after attracting 34 lenders in February. Seven Chinese banks took 30.7% of the deal, while 16 Taiwanese banks came in for 30.5%.
It followed a five-year term loan Saudi National Bank upsized to US$1.5bn from US$1bn in another widely syndicated deal that drew in 37 banks, with a dozen Chinese lenders taking around 45% of the facility, and 11 Taiwanese banks committing 20.6%.
Chinese lenders had also gravitated towards high-quality Gulf names as they recalibrated China’s Belt and Road Initiative strategy away from politically driven infrastructure lending and towards better rated, economically viable assets.
ADQ is rated Aa2/AA (Moody’s/Fitch), while Emirates NBD is rated A+ (Fitch). SNB is rated A/A (S&P/Fitch).
Saudi focus
Saudi borrowers, in particular, had been tapping Asian lenders more frequently, drawing in relatively new liquidity providers such as Japan’s megabanks Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corp, which expanded their focus on the Middle East to meet rising demand from highly rated, government-related credits.
Emirates NBD is a Dubai government-owned bank and closed its loan just days before Israel and the US launched attacks on Iran on February 28. Two Saudi borrowers were not so fortunate. SNB Capital, the securities, asset management and investment banking arm of SNB, launched a three-year loan of up to US$500m just before the conflict broke out and had an April 13 commitment deadline that is now expected to be extended.
“We have suspended any new loans to Middle Eastern names including SNB Capital,” said a Tokyo-based banker.
Commitments for state-owned Saudi Electricity’s five-year loan of up to US$1.5bn were due on February 27 – one day before the war erupted – and that deadline has also passed with no clarity on the deal’s closing.
Mizuho is the mandated lead arranger and bookrunner on SNB Capital’s three-year financing, which offers an interest margin of 80bp over SOFR, while SMBC is MLAB on Saudi Electricity’s five-year loan – its third in Asia Pacific since September – that pays all-in pricing of 100bp via a 75bp participation fee.
Pricing on ongoing transactions is expected to stay unchanged unless market flex clauses are triggered, but terms on new deals are likely to face a pricing rethink.
ADQ was said to be planning to amend and extend a US$6bn financing maturing in 2027. It is not clear if that deal will go ahead.