Some banks from Japan, Greater China and Singapore are also reviewing their pipelines and existing exposures.

On the sidelines of a meeting this week of Asia’s largest loan association, private conversations were dominated by a single theme: how the Iran war has rattled enthusiasm for the Middle East.

That mood marked a sharp reversal from just weeks earlier. In late January, the Asia-Pacific Loan Market Association (APLMA) held its first-ever conference in Dubai, with some 300 people in attendance, nearly half of whom flew in from outside the region. 

The talk then was all about rapidly expanding financing links between Asia and the Middle East. Even some Chinese banks without a physical presence in the region were eager to lend, helping push loan commitments to record levels last year. 

For many Asian lenders, the region had emerged as the key growth engine for 2026, offering relief from slowing deal flow and intensifying price competition at home.

That optimism quickly faded as the hostilities in the region weighed on sentiment. At the APLMA gathering in Hong Kong this week, the conflict in the Middle East loomed large in hallway conversations, even as it barely featured in formal panel discussions. In private, bankers spoke of reassessing their ambitions in the Gulf and weighing a growing list of risks triggered by the conflict.

That added to signs of concerns that had already been emerging in recent days. Several global lenders, including HSBC Holdings and Standard Chartered, both major arrangers in Asia’s loan markets, have told some Middle East clients that some transactions involving Asian balance sheets will need to be put on hold, according to sources familiar with the matter. 

Some banks from Japan, Greater China and Singapore are also reviewing their pipelines and existing exposures. Several are considering a shift in focus towards other markets, including South Korea and Australia, where risks are more stable for now. 

Elsewhere, a major Singaporean bank has shelved its Middle East expansion plans for 2026, according to a source with knowledge of the matter. Its Hong Kong team had travelled to Dubai in February to meet clients, but has since been instructed to pause discussions.

The shift comes after a period of rapid expansion in the Middle East. Asian lenders have steadily increased their involvement in the region since last year. Syndicated loan volumes to the Middle East and North Africa rose 12 per cent to about US$180 billion in 2025, even as Asia-Pacific loan volumes excluding Japan fell roughly 18 per cent, according to the APLMA.

Chinese banks, in particular, had been stepping up their presence. Their lending to the region nearly tripled to a record US$15.7 billion in 2025, based on Bloomberg-compiled data. Flush with low-cost funding, these banks have been expanding overseas as domestic credit demand weakens and price competition intensifies across Asia’s loan markets.

But two weeks of escalating military operations in the Middle East have shocked residents and visitors in the region, sparked extreme volatility in oil and gas markets, unsettled global finance and disrupted transportation routes.

One major Chinese bank recently took the rare step of restricting a drawdown on a bilateral facility to a financial entity linked to the Abu Dhabi government, sources familiar with the matter said. 

Meanwhile, Hong Kong-based bankers with at least two Chinese lenders have been required to provide daily updates to headquarters on developments related to regional risks and loan exposures, other sources said.