Muscat – Most GCC sovereigns have so far demonstrated resilience since the start of the US–Israel war with Iran, according to Fitch Ratings. However, a re-escalation of hostilities beyond the intensity seen prior to the ceasefire, or a more prolonged disruption to economic activity, could further test their resilience and exert additional pressure on sovereign ratings, the agency said.

Fitch noted that such developments would increase both immediate and longer-term risks beyond those observed so far.

The agency placed the sovereign ratings of Qatar and Ras Al Khaimah on Rating Watch Negative (RWN) in late March and early April, respectively. In Qatar’s case, the RWN reflects factors including the adverse impact of strikes on the Ras Laffan LNG complex and the closure of the Strait of Hormuz. For Ras Al Khaimah, it reflects the potential negative impact on medium-term growth.

Fitch said the conflict has not resulted in rating or outlook changes for other GCC sovereigns, even as hostilities extended beyond end-March. ‘Our original expectation had been that the conflict would conclude within one month, but it has persisted, extending the effective closure of the Strait of Hormuz,’ the agency said.

‘Oman most insulated’

Among GCC sovereigns, Oman is the most insulated from the Iran conflict, as its exports do not rely on the Strait of Hormuz, Fitch noted.

‘As a result, higher oil prices are beneficial to Oman’s key sovereign credit metrics. Oman is the only GCC sovereign for which Fitch has improved its 2026 real GDP growth and fiscal balance forecasts in the most recent Sovereign Data Comparator, published on March 31,’ the agency said.

Saudi Arabia and the United Arab Emirates (particularly Abu Dhabi) have also benefited from their ability to export large volumes of hydrocarbons via pipelines that bypass the Strait of Hormuz, the agency said.

‘Rerouting and short-lived damage to energy infrastructure have reduced export, and therefore production, volumes. However, the offsetting effect of higher prices means oil export revenues remain broadly in line with pre-war levels for the UAE/Abu Dhabi and above them for Saudi Arabia, supporting public finances,’ Fitch said.

For Kuwait, Fitch added, the country lacks alternative export routes that bypass the Strait of Hormuz, and its economy is more heavily dependent on oil than those of Saudi Arabia and the UAE.

‘This means that disruptions to production and exports will have a substantial impact on the economy and public finances until normal flows resume. However, this is significantly mitigated by Kuwait’s strong balance sheet. Government debt is low, and sovereign net foreign assets are the highest among Fitch-rated sovereigns, equivalent to around 12 years of 2025 expenditure,’ the agency said.

Fitch warned that the risk of a renewed flare-up remains significant. Potential sources of pressure on GCC sovereign ratings include greater disruption to oil and gas exports due to severe damage to energy production, processing and transportation infrastructure; a prolonged closure of the Strait of Hormuz; and, in the case of Saudi Arabia, disruptions to shipping through the Red Sea.

‘A possible ground invasion of Iran or the destruction of Iranian energy infrastructure could prompt Iran to target similar assets across the GCC more extensively. The direct involvement of GCC sovereigns in hostilities would also place downward pressure on their ratings,’ Fitch said.