Oil Price Surge Bolsters UAE, Oman Finances Amid Regional Conflict
The oil price surge has offset the impact of regional conflict on government finances in the UAE and Oman, according to Capital Economics. The firm expects stronger government finances in both countries this year despite the ongoing US-Israel-Iran war.
In contrast, Saudi Arabia's budget balance is expected to worsen by about 2% of GDP, while Kuwait and Bahrain's balances will decline by around 5%. Qatar's fiscal hit is estimated to be the largest due to its reliance on liquefied natural gas exports, which cannot be diverted through pipelines.
The Strait of Hormuz, a vital maritime chokepoint, has been severely disrupted due to Iranian attacks on vessels. Oil tankers and other ships have been damaged in these attacks, resulting in casualties. Capital Economics projects that disruption will continue until early next year.
The UAE's oil output increased after it exited the OPEC oil group earlier this year, allowing it to accelerate investments in the hydrocarbon sector. Higher output amid rising oil prices has improved the UAE and Oman's fiscal balances.