Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Sovereign ratings of Abu Dhabi at AA/Stable and the UAE at AA-/Stable were reaffirmed as the UAE was able to continue exporting large quantities of hydrocarbons via pipeline that bypasses the Strait of Hormuz, Fitch Ratings said in an analytical report
“Rerouting and short-lived damage to energy infrastructure has reduced exports and therefore production volumes, but the offsetting impact of higher prices means oil export revenues are in line with pre-war levels for UAE/Abu Dhabi,” Fitch Ratings said.
Most Fitch-rated Gulf Cooperation Council (GCC) sovereigns have proved resilient since the breakout of the US-Iran hostilities, the report said, with only limited rating actions despite the conflict extending beyond initial expectations.
Along with the UAE, Saudi Arabia has similarly benefited from bypass route, with higher oil prices supporting public finances.
Kuwait, while more exposed due to its heavy reliance on the Strait of Hormuz for exports, continues to draw strength from its exceptionally strong balance sheet, characterised by low debt and very high sovereign net foreign assets.
Qatar has faced some pressure, including the impact on its gas infrastructure and its placement on Rating Watch Negative, but retains solid fundamentals.
Oman remains relatively insulated from the disruption as its exports do not depend on the Strait, allowing it to benefit from higher oil prices.
Bahrain, the lowest-rated among the group, continues to rely on strong and credible financial support from fellow GCC countries, which Fitch expects to remain forthcoming.
A comparison of hydrocarbon export exposure highlights the UAE’s relative resilience. Abu Dhabi routes about 40% of its hydrocarbon exports through the Strait of Hormuz, and the impact of a one-week closure is estimated at just -0.1% of GDP at $100 per barrel, easing to neutral at higher oil prices. This is supported by relatively low debt of 18.7% of GDP and strong sovereign net foreign assets of 297.5% of GDP, the Fitch Ratings report sad.
This limited impact reflects the effectiveness of alternative export routes and the cushioning effect of price gains, reinforcing the stability of the UAE’s fiscal position compared to more exposed peers.
