Saudi-UAE Business Tensions Escalate Amid Economic Competition

Growing Economic Rivalry Impacts Regional Commerce

Middle East businesses are closely monitoring escalating tensions between Saudi Arabia and the United Arab Emirates (UAE), with concerns mounting over potential disruptions to commerce and investment flows. The two Gulf powerhouses are engaged in an intensifying economic competition as they both pursue ambitious diversification strategies away from hydrocarbon dependence, aiming to establish themselves as the region's preeminent business and financial hubs.

This rivalry has manifested in various policy shifts and geopolitical disagreements, prompting companies operating across both markets to initiate contingency planning to safeguard business continuity.

Saudi Policies Challenge UAE's Business Dominance

A significant driver of the current tensions is Saudi Arabia's assertive economic policies designed to attract foreign investment and corporate presence. In February 2021, Saudi Arabia announced a policy, effective January 2024, requiring international companies to relocate their regional headquarters to the Kingdom to be eligible for government contracts. This move directly challenges the UAE's long-standing position, particularly Dubai's, as the preferred regional base for multinational firms.

Further impacting trade, Saudi Arabia amended its import rules in July 2021. These changes exclude goods made in free zones or those with less than 40% local value-added or a 25% local workforce from certain Gulf Cooperation Council (GCC) tariff agreements. Many observers view these restrictions as specifically targeting the UAE's extensive free zone economy.

Additionally, Saudi Arabia has introduced an updated Investment Law and a new Law of Real Estate Ownership by Non-Saudis, effective January 2026, aimed at streamlining investment procedures and offering equal treatment to local and foreign investors to further attract global capital.

Business Concerns and Geopolitical Underpinnings

The escalating competition has led to tangible concerns for businesses. Some UAE-based firms have reportedly faced difficulties in obtaining Saudi business visas. In response, companies are assessing plans to open offices in Saudi Arabia or build inventory as a buffer against potential curbs on cross-border activity. The trade volume between the two nations is substantial, with bilateral trade reaching nearly $30 billion by the end of 2023, according to Saudi data.

Beyond economic policies, geopolitical factors contribute to the strain. Tensions became publicly apparent in December (prior to January 2026) with reports of Saudi Arabia demanding the withdrawal of UAE forces from Yemen, followed by critical rhetoric in Saudi media. Diverging interests in regional conflicts, such as those in Yemen and Sudan, and competition in sectors like the gold trade, underscore the broader geopolitical rivalry.

Outlook for Resolution

The situation has drawn comparisons to the 2017 Qatar blockade, raising anxieties about regional stability. However, some officials have expressed optimism for de-escalation. Saudi Foreign Minister Prince Faisal bin Farhan Al Saud and Finance Minister Mohammed Al-Jadaan have indicated a willingness to resolve differences, with Al-Jadaan stating that 'aside from national security matters, everything else can be discussed.' Despite the heightened political discourse, some business professionals note that there has been no major disruption to investments or commercial activity so far, with hopes for resolution through diplomatic channels.