Credit rating agency Moody’s acknowledged that Saudi Arabia and the UAE have partial alternatives to the Strait of Hormuz when exporting oil via pipelines, but they do not fully compensate for the entire export volume.
Moody’s added in the report that Bahrain, Kuwait, Qatar and Iraq will face financial pressures as a result of their exports relying on the strait, but the pressures will be less severe as Qatar, Kuwait and Abu Dhabi have significant fiscal space in case the strait is temporarily closed.
He explained that the base case scenario assumes a relatively short-term conflict, perhaps only a few weeks, after which navigation in the Strait of Hormuz resumes, and that this scenario is unlikely to have a measurable credit impact.
He added that any prolonged disruption in the Strait of Hormuz would likely lead to continued increases in oil prices, deepen global risk aversion, and put further pressure on credit spreads in high-yield bond markets, suggesting that such a scenario would increase refinancing risks for short-maturity issuers, particularly those in energy-intensive and cyclical industries that already face high costs, as well as complicate the trajectory of interest rates and central bank decisions.
He said infrastructure projects, particularly those related to pipelines, liquefied natural gas facilities and energy-related transportation in the region, may face operational risks, noting that many project finance structures benefit from strong force majeure clauses that reduce the impact on short-term cash flows even in the event of property damage.
He added that airlines, tourism and logistics companies will also face increasing pressure due to expanded weather restrictions, hesitance to travel and disruption to operations, especially in Gulf regional hubs such as Dubai, Doha and Manama.
He noted that the closure of the Strait of Hormuz would disrupt trade flows and reduce trade volumes, which would be credit negative for UAE ports, particularly Jebel Ali and Khalifa ports under the Abu Dhabi Ports Company, which rely on the strait as a single maritime access point, but geographical diversity would help mitigate the impact.
