S&P Global Ratings said that explosions in Abu Dhabi, which initial reports suggest were due to drone strikes orchestrated by Iranian-backed Houthi rebels, reflect geopolitical risks already factored into the agency's sovereign ratings.

The UAE's largest emirate has a rating of AA/Stable/A-1+.

"Under our base-case scenario, however, we expect damage to infrastructure to be manageable given the relatively limited destructive capacity of the attacks so far. In our view, the exceptional strength of the government of Abu Dhabi's balance sheet remains a key support for the ratings. This is despite our assumption of high geopolitical uncertainty in the wider Gulf region resulting in unpredictable adverse developments such as these attacks in Abu Dhabi," said Trevor Cullinan, credit analyst, in a report.

The UAE is a member of the Saudi Arabian-led coalition fighting against the Houthis and other armed groups in Yemen since 2015. While the Houthis have threatened further attacks on the UAE, Saudi Arabia has largely borne the brunt of attacks given its proximity to Yemen, the report said.

"More generally, we do not expect tensions between Iran and its proxies and Gulf Cooperation Council Countries will lead to direct military conflict, although geopolitical risks in the region are likely to remain elevated and flare up from time to time."

According to the UAE's official news agency, the explosion of three petroleum tankers in an industrial area of Abu Dhabi on January 17, 2022, led to three deaths and six injured persons. Media reports also indicate a small fire at Abu Dhabi's international airport. Houthi rebels claimed responsibility for the attack.

(Writing by Brinda Darasha; editing by Daniel Luiz)


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