Resilience of Islamic and Conventional Banks in The GCC During Systemic Crises: Evidence from A Dynamic Panel GMM Framework

The current study investigates the Islamic and conventional banks’ resilience in the GCC across four systemic crises, the GFC, Arab Spring, oil ‎price crash, and COVID-19, through a dynamic panel GMM framework that incorporates an inflation threshold. The findings confirm that ‎resilience is a multidimensional and crisis-specific concept. Market valuations (Tobin’s Q) deteriorated sharply during the GFC and COVID-19, ‎while the Arab Spring and oil price crash elicited more adaptive responses. In contrast, credit risk (NPL/TA) rose significantly during the Arab ‎Spring, with weaker direct effects from other crises. The role of inflation is pivotal: when inflation exceeded 3%, Islamic banks exhibited greater ‎vulnerability during oil shocks but enhanced resilience during the Arab Spring and the COVID-19 pandemic, reflecting differences in policy ‎responses, structural features, and funding models. Across indicators, a duality emerges, Islamic banks often outperformed in market valuation ‎terms but showed heightened sensitivity in asset quality under adverse inflation dynamics. Country-level effects further highlight heterogeneity, ‎with Oman appearing more resilient, while Saudi Arabia and the UAE faced stronger valuation pressures. The study demonstrates that resilience ‎in dual-banking systems is heterogeneous, inflation-sensitive, and shaped by both market- and balance-sheet dimensions, underscoring the need ‎for inflation-aware macroprudential policies, countercyclical buffers, and targeted credit monitoring to safeguard GCC financial stability‎.