UAE explores dollar swap line with US amid rising Gulf tensions: WSJ

WEB DESK: The United Arab Emirates has reportedly held preliminary talks with the United States over the possible establishment of a dollar swap line, as regional conflict raises concerns over financial stability and energy exports, according to The Wall Street Journal.

The report, citing US officials, said Khaled Mohamed Balama, Governor of the UAE Central Bank, met in Washington last week with US Treasury Secretary Scott Bessent, alongside officials from the Treasury Department and the Federal Reserve, to discuss the proposal.

Officials said no formal request has yet been submitted and discussions remain at an early review stage.

Economic safeguard amid regional uncertainty

The UAE is said to be acting pre-emptively over fears that ongoing conflict could damage its economy and weaken its role as a global financial hub. Oil and gas infrastructure, along with Dubai, have reportedly faced exposure to drone and missile threats linked to Iran.

Any disruption to crude shipments through the Strait of Hormuz would directly affect the country’s key source of dollar revenues, prompting concerns over declining reserves, potential capital flight and volatility in domestic markets.

Dollar dominance and alternative options

According to the report, Emirati officials also warned that in the event of a serious dollar shortage, the country may need to rely on other currencies, including the Chinese yuan, for certain oil transactions. Analysts view such a move as a possible challenge to the dollar’s dominant role in global trade.

However, The Wall Street Journal noted that approval of a formal swap line by the Federal Reserve remains unlikely. The Fed has historically extended such arrangements only when overseas shocks risk spilling over into the US financial system.

Even so, the US Treasury is reportedly exploring whether alternative support mechanisms could be considered if market pressures intensify.