Saudi Arabia ‘resilient’ to Hormuz turmoil on export flexibility, diversification: Tassnief

Logo of Simah Rating Agency (Tassnief)

Simah Rating Agency (Tassnief) said core GCC economies such as Saudi Arabia and the UAE remain resilient against disruptions in the Strait of Hormuz, thanks to export flexibility, strong reserves, and economic diversification.

GCC sovereigns retain strong buffers and policy flexibility. While higher oil prices support their resilience, export-diversified economies like Saudi Arabia, the UAE, and Oman are better positioned to contain disruptions in Strait of Hormuz, according to a recent report.

Tassnief further stated that Saudi Arabia and the UAE maintain strong fiscal buffers via their sovereign wealth funds, with over $1 trillion and $1.8 trillion in assets, respectively. This provides a substantial capacity to absorb shocks, support fiscal budgets, and manage war-related costs without immediate balance sheet pressure.

It noted that while Saudi Arabia relies on Strait of Hormuz for its exports, its pipelines to the Red Sea and large-scale assets provide resilience, keeping inflation low at an average of 2% over the next four years.

Saudi Arabia’s rerouting of crude via the East-West pipeline, which operates near its seven million barrels per day (bpd) capacity, alongside utilization of five million bpd at Yanbu, may help mitigate the risk of supplies being stranded inside the Gulf. However, this shifts oil-market risks toward the Red Sea, specifically to the Bab Al-Mandeb chokepoint, said the ratings agency.

Any disruption there could significantly impact these rerouted volumes, especially for Asia-bound flows, increasing exposure despite avoiding upstream production shut-ins, it added.