Moody's: Saudi Arabia, UAE have partial alternatives to Strait of Hormuz for oil exports

Moody’s said that any prolonged disruption in the Strait of Hormuz would lead to a sustained rise in oil prices

Credit rating agency Moody's said that Saudi Arabia and the UAE have partial alternatives to the Strait of Hormuz for oil exports via pipelines, but they do not fully compensate for the entire volume of exports.

In a report, Moody's added that Bahrain, Kuwait, Qatar, and Iraq will likely face financial pressure as a result of their dependence on the Strait for exports, although the pressure will be less on Qatar, Kuwait, and Abu Dhabi because they have large financial reserves in case of a temporary closure of the Strait.

The baseline scenario assumes that the conflict is relatively short-lived, likely a matter of weeks, and that navigation through the Strait of Hormuz will then resume at scale.

Moody's also indicated that any prolonged disruption in the Strait of Hormuz would lead to a sustained rise in oil prices, deepen global risk aversion, and likely generate greater pressure on credit spreads in high-yield bond markets.

Such a scenario would heighten refinancing risks for issuers with near-term maturities, particularly in energy-intensive and cyclical industries that already face high input costs. It would also complicate the course of interest rates and central bank decision making, the report said.

Additionally, infrastructure issuers — especially those with exposure to pipelines, LNG facilities or energy-related transport in the region — could face operational risks. However, many project finance structures benefit from robust force majeure clauses, which mitigate short-term cash flow effects even in cases of physical damage. Aviation, tourism and logistics companies would also face intensified strains as airspace restrictions, travel hesitancy and operational disruptions mount, particularly in Gulf hubs such as Dubai, Doha and Manama.

Moody's also noted that the closure of the Strait of Hormuz will be credit negative for UAE ports, as it will disrupt trade flows and reduce volumes, particularly for Jebel Ali Port and Khalifa Port, owned by Abu Dhabi Ports, which rely on the Strait as their sole maritime access point. However, their geographic diversification would help soften the impact, the rating agency added.