Iran war fiscal impact model: Kuwait and Qatar hit hardest, Bahrain may need support

GULF COUNTRIES - Report 11 Mar 2026 by Justin Alexander

This report includes a simple model (which clients can manipulate) to estimate the possible fiscal impact of the war. Kuwait and Qatar face the largest fiscal hits due to their near-total reliance on Hormuz-dependent exports, but both have deep reserve buffers. Kuwait will soon need to shut down most crude production, while Qatar's LNG will be slow to restart. Bahrain's fiscal impact is smaller in absolute terms but lands on the weakest balance sheet in the GCC—a structural double-digit deficit and debt around 150% of GDP—raising the prospect of a third bailout, now more likely given the collapse of the regional détente with Iran and renewed domestic instability. Saudi Arabia and the UAE are partly shielded by pipeline bypass capacity to non-Hormuz ports, although volumes remain uncertain. Oman is not expected to see a hit to production or exports as it has not suffered many attacks and is east of Hormuz, but it will benefit from higher prices. Sovereign credit markets have weakened across the board, with Bahrain's CDS spreads spiking to 2022 highs, before easing slightly. Other sovereigns have only seen modest movements, and the Oman and Saudi CDS spreads have even fallen below their pre-war level.

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