GCC have sufficient room to withstand short regional conflict: Fitch

Fitch Ratings said sovereign ratings in the GCC have sufficient room to absorb a short regional conflict without further escalation, but warned that a prolonged or broader confrontation could weigh on creditworthiness across the region.

Fitch’s base case assumes tensions last less than one month, with the Strait of Hormuz effectively closed throughout the conflict, whether due to security risks or insurance constraints. More than 20 million barrels per day of crude and refined products transit the strait, alongside substantial LNG shipments, making it a critical artery for Gulf energy exports.

The agency said significant physical damage to oil infrastructure would pose the greatest risk to ratings, though this is not part of its current assumptions. It noted that Saudi Arabia and the UAE have pipeline capacity to reroute a large share of exports away from the strait, and major exporters hold oil inventories outside the region. Bahrain, Kuwait, Qatar and Iraq remain more exposed given their heavier reliance on Hormuz.

Higher oil prices could partly offset the impact of any short-lived export disruption, provided shipments continue to reach markets. Fitch also expects a temporary hit to non-oil activity, amid partial flight suspensions, slower consumption and weaker tourism.

The agency added that most Gulf states hold substantial sovereign assets, providing strong fiscal buffers in the event of a temporary drop in energy revenues.

Geopolitical risks are already factored into ratings, offering some additional room to absorb short-term shocks.