Gulf region: Shock resilience and investment outlook – BNP Paribas

BNP Paribas’ Stéphane ALBY assesses how Gulf economies are absorbing the conflict-related shock. He notes that Oil exports via the Strait of Hormuz have been severely disrupted, with Bahrain, Kuwait, and Qatar hit hardest, while Saudi Arabia and the UAE partially benefit from higher Oil prices. Despite likely Gross Domestic Product (GDP) contraction and pressure on tourism, transport, and real estate, strong macro fundamentals and large sovereign wealth funds support resilience, though heightened geopolitical risk may weigh on future foreign investment flows.

Conflict shock versus strong fundamentals

"The reopening of the Strait of Hormuz will be key. Apart from Oman, only Saudi Arabia and the United Arab Emirates have the capacity to bypass the Strait of Hormuz, but only for limited quantities."

"For these three countries, the rise in global oil prices should partially offset the decline in export volumes."

"Given the significant weight of hydrocarbons to the Gulf economies, a contraction in regional GDP is likely this year."

"Thankfully, the Gulf’s macro fundamentals are solid enough to absorb the shock."

"The Gulf economies’ capacity to withstand a shock is therefore very strong. In the very short term, we can expect a shift in priorities towards supporting their own economies, and therefore a slowdown in foreign investment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)