Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
The ratings of state-owned companies in the UAE are unlikely to be affected by the ongoing geopolitical crisis, according to an assessment by Fitch Ratings.
The rating agency said this reflects the strong likelihood that the government of the UAE will support its operating companies and its baseline assumption that the conflict will be short-lived, lasting less than a month.
Most rated corporate entities in the GCC are assessed on a top-down basis, meaning their ratings move in line with the Issuer Default Rating of the relevant sovereign.
However, Fitch noted that its base case remains subject to high uncertainty, and a more prolonged disruption to energy exports could have more severe repercussions for sovereign credit profiles in the region.
Fitch expects publicly rated national oil companies in the region to be able to absorb the impact of the current disruption, given their strong financial profiles, minimal financial leverage and access to substantial committed liquidity.
These include companies such as QatarEnergy, Saudi Aramco, Energy Development Oman and OQ S.A.O.C., whose ratings are currently constrained by their respective sovereign ratings.
“Our base case is that the effective closure of the Strait of Hormuz will be temporary, given its vital economic role,” Fitch Ratings said.
Restrictions on marine traffic through the strait could, however, put pressure on the UAE corporates’ ability to export products or maintain supply chains in the short term.
Corporates and infrastructure operators generally have adequate short-term liquidity to cover operational shortfalls, although a longer interruption may increase their reliance on sovereign support, Fitch said.
Supply chain disruptions could also affect industrial and construction companies whose materials largely transit through the Strait, potentially disturbing construction programmes, particularly for bespoke items.
Shipping lane closures may also constrain food supply chains, especially grains and rice, although Fitch expects air freight for fresh goods to resume shortly and refrigerated cargo to be prioritised.
Major utility and infrastructure providers, including Abu Dhabi National Energy Company, are unlikely to be materially affected due to a high level of redundancy in their networks and power-generation operations.
Once supply chain disruptions ease, Fitch expects utilities’ large capital expenditure programmes to continue in support of development plans, helping economic growth and reducing reliance on natural resources for energy production in the future.
While the UAE and parts of Saudi Arabia may experience short-term disruption and the need for temporary operational adjustments at major ports, Fitch expects operations to normalise with no lasting impact if the conflict remains contained.
Major port operators, such as Abu Dhabi Ports Company, could see some earnings pressure, although their ratings are expected to remain resilient, supported by global diversification, the potential to capture rerouting demand and higher storage revenues.
Fitch added that risks would increase if the conflict spreads geographically or persists for an extended period, particularly for sectors such as tourism and business travel.
Even if hostilities subside quickly, the attacks could weigh on confidence in tourism and real estate during the peak Eid and Easter holiday periods in late March and early April 2026.
However, the GCC’s more developed tourism infrastructure could support a faster recovery compared with the period after the global financial crisis.
