Global trade credit insurance company, Atradius, says that Qatar is the country among the six GCC states that is most exposed to the on-going military escalation in the Middle East.
Atradius points out that all of Qatar’s liquefied natural gas exports must transit through the Strait of Hormuz, which the Iranian side has said is blocked. This vulnerability explains Qatar’s precautionary decision to halt LNG production temporarily following recent security incidents.
Oman appears less vulnerable because its main port, Duqm, lies outside the Strait, although recent drone attacks and incidents in the Gulf of Oman highlight additional risks. The UAE and Saudi Arabia can divert part of their oil exports through pipelines, although this only partially mitigates the impact.
Prolonged escalation
Atradius says that if the military conflict is prolonged, estimates suggest that oil prices could rise to $130-140 per barrel. Although Iran is unlikely to keep the Strait of Hormuz closed for an extended period, it could continue to disrupt shipping inside and outside the strait, creating persistent instability in global energy flows.
Under these conditions, Bahrain would likely be the first Gulf state to face financial stress due to its weak public finances, limited buffers, and strong dependence on oil revenues. Other Gulf economies would also come under sustained pressure, as disruptions to logistics, tourism, and export activity persist for longer.
Baseline scenario
Atradius says that its baseline scenario for the on-going military action in the Middle East assumes a short-lived conflict followed by a gradual return to diplomatic engagement, including a renewed attempt at nuclear negotiations.
Mr Niels de Hoog, Senior Economist at Atradius, said, “Iran is largely isolated and would find it difficult to sustain a prolonged confrontation.“
He added that the company does not expect Iran to be able to keep the Hormuz Strait closed for an extended period, since an international maritime operation led by the US would very likely bring any blockade to an end relatively quickly. "A prolonged shutdown would also run counter to Iran’s own interests, as it would block its vital oil exports to China.”
Referring to Iran, he said, “The recent high-risk actions targeting Gulf states seem primarily intended to create political leverage to return to negotiations. A major escalation would be counterproductive, as it could push the Gulf states to actively turn against Iran.”
Impact on GCC states
In a short conflict scenario, the economic impact on the Gulf states remains limited, although disruptions are unavoidable. Because the Strait of Hormuz is effectively blocked, the Gulf states cannot benefit from higher oil prices, and their non-oil economies face temporary pressures from airspace closures and disruptions to tourism, logistics, and re-export activities.
Thanks to their substantial international reserves and large sovereign wealth funds, most Gulf economies are able to absorb a disruption lasting a few weeks, with an estimated average growth impact of around half a percentage point, Atradius says.