HSBC and StanChart Most Exposed to Middle East Conflict

March 12, 2026 (Reuters) – Among European banks, HSBC and Standard Chartered face the greatest exposure to the ongoing conflict in the Middle East, according to a cautionary note from J.P. Morgan on Thursday. The advisory suggests that potential earnings pressure could result, even if outright credit losses remain limited.

Earlier this week, the STOXX 600 Banks index touched a three-month low, having fallen nearly 6% since February 27. Shares of HSBC dropped over 5% on Thursday, while Standard Chartered fell more than 2%. Rising energy prices are expected to impact corporate lending across multiple sectors, including agriculture, manufacturing, construction, and transport, analysts warned.

Estimated Exposure of HSBC and Standard Chartered

For Standard Chartered, excluding Turkey and Egypt, Middle East exposure is estimated at around 8% of revenue and 12% of profit before tax (PBT). The bank has disclosed approximately $9 billion of loans to the UAE in fiscal 2025, representing nearly 2% of its total loan book, with about $6 billion booked in its UAE branches as of the third quarter.

HSBC’s revenue and PBT exposure is estimated at roughly 4%, but could rise to nearly 9% when including Egypt, Turkey, and Saudi Arabia. J.P. Morgan estimates that HSBC’s lending exposure in the region, predominantly UAE and Qatar, amounts to approximately $23 billion, or around 2% of its total loan portfolio. Additional exposures include its 31% stake in Saudi Awwal Bank and multinational client portfolios.

Risk Assessment

J.P. Morgan notes that the main risk stems from earnings pressure rather than credit losses, as Middle East portfolios are concentrated among high-rated corporates. In contrast, other major European banks—including Julius Baer, Societe Generale, ING, Barclays, Banco Santander, BNP Paribas, and Deutsche Bank—have limited exposure, with less than 1% of revenue and PBT affected. Notably, around 11% of assets under management for Julius Baer are from Middle East clients.

Wealth management arms, such as UBS Global Wealth Management and Julius Baer, are expected to benefit from high-net-worth clients diversifying assets to mitigate geopolitical risk. Nevertheless, UBS recently downgraded European banks to “neutral,” citing restricted potential for sustained gains beyond an initial rebound even if energy flows normalise rapidly.