The GCC sovereigns’ ongoing stable credit quality is supported by an expected strong, hydrocarbon-driven economic recovery in 2027 and robust fiscal buffers, S&P Global Rating said in a report published today (July 7).
The report, "Middle East War: GCC Sensitivity And Sector Vulnerabilities Aren't Homogenous," notes, however, that prolonged geopolitical uncertainty could strain public finances, rattle confidence-sensitive investment and consumption, and expose variances in sovereigns' fiscal ability to absorb lengthy disruptions.
S&P Global Ratings pointed out that there is a high degree of unpredictability around the duration and scale of the Middle East war and its potential effect on commodity prices, supply chains, economies, and credit conditions.
As a result, its baseline forecasts carry a significant amount of uncertainty.
"The conflict will weigh heaviest on sectors reliant on tourism, consumer spending, transportation and logistics and energy," remarked S&P Global Ratings analyst Sapna Jagtiani.
“For corporates, we also expect profitability effects given higher logistics costs, reassessment of discretionary capital expenditure, and lower volumes of capital market debt issuance in 2026. A further confidence shock would exacerbate risk for companies exposed to consumer and service demand,” she stated.
According to S&P, the geopolitical volatility will dictate the pace of the GCC economic recovery through the rest of 2026 and into 2027, while ongoing pressures threaten to widen gaps in credit quality between some sovereigns and to test the financial resilience of regional banks.
Robust net asset positions and liquidity buffers currently support sovereign creditworthiness, yet persistent tensions threaten to strain public finances and weigh on confidence in cyclical industries.
“Our forecast is that GCC banks will continue to deliver solid earnings, maintain capital buffers, and demonstrate stable funding profiles, though the Middle East war and ongoing uncertainty will likely slow their growth,” noted S&P Global Ratings analyst Tatjana Lescova.
“In a downside scenario the ability to weather fund outflows and asset quality deterioration will be key,” she added.-TradeArabia News Service
