A. SREENIVASA REDDY (ABU DHABI)
Most GCC states have substantial assets that would provide a buffer in the event of short-term energy revenue disruption, according to a Fitch Ratings assessment.
“Middle Eastern sovereign ratings generally have sufficient headroom to withstand a short regional conflict that does not escalate further,” Fitch Ratings said on Monday.
Material damage to GCC energy export infrastructure would be the most likely factor to pressure sovereign ratings. “While some small damage has occurred, this is not in our baseline,” Fitch Ratings said.
Fitch said the effect on economic growth would be temporary. “The conflict will have a near-term effect on non-oil economic activity,” it said.
There is still likely to be a near-term hit to oil and gas activity, particularly for Bahrain, Kuwait and Qatar, which lack supply routes that can bypass the Strait of Hormuz, Fitch Ratings said.
“An element of geopolitical risk is captured in the ratings of most sovereigns in the region,” Fitch said, indicating that a revision of sovereign ratings is unlikely.
Fitch Ratings said higher energy prices could even benefit Gulf economies. “Higher prices would mitigate the impact of a short-lived disruption on export earnings, to the extent that shipments still get out."