Fitch Sees Hormuz Reopening Deal by Q1 2027; 3 Outlooks Negative
(MENAFN) Fitch Ratings projects a lasting deal to reopen the Strait of Hormuz will be struck in the first quarter of 2027, even as the US-Iran war puts mounting strain on Middle East and North Africa credit profiles, the agency said Monday.
The forecast is the base case in a commentary released with Fitch’s latest regional peer review. The agency found sovereign ratings across the region have so far held firm, propped up by elevated oil prices, a rebound in crude exports and sizable financial cushions.
Gulf Cooperation Council members and Iraq have absorbed the heaviest blows, enduring sporadic strikes from Iran and allied regional proxies, along with interruptions to the primary shipping lane for their hydrocarbon exports.
Beyond the Gulf, other factors have softened the impact of costlier oil. Heavy outside support for Egypt and Jordan, fast-growing tourism in Egypt and robust foreign direct investment in Morocco have all provided a counterweight.
Limited fiscal reforms have also steadied debt-to-GDP ratios, though Fitch noted that governments remain wary of pressure on social stability.
The region’s average sovereign rating is unchanged from a year ago. Both rating moves in that period, an upgrade for Oman and a downgrade for Bahrain, came before the war began.
Even so, the outlook picture is the bleakest in nearly five years: three sovereigns hold negative outlooks and none holds a positive one, the weakest balance since late 2021.
War-related risks underpin the negative outlooks on Qatar and Ras al Khaimah. Both were recently taken off negative rating watch, a status imposed when hostilities peaked.
Qatar’s outlook stems from its inability to ship liquefied natural gas while the strait remains disrupted. Ras al Khaimah faces threats to a potentially transformative tourism project that had underpinned an earlier upgrade.
Israel also keeps a negative outlook, reflecting an anticipated further rise in public debt and war-linked risks to growth and public finances.
The forecast is the base case in a commentary released with Fitch’s latest regional peer review. The agency found sovereign ratings across the region have so far held firm, propped up by elevated oil prices, a rebound in crude exports and sizable financial cushions.
Gulf Cooperation Council members and Iraq have absorbed the heaviest blows, enduring sporadic strikes from Iran and allied regional proxies, along with interruptions to the primary shipping lane for their hydrocarbon exports.
Beyond the Gulf, other factors have softened the impact of costlier oil. Heavy outside support for Egypt and Jordan, fast-growing tourism in Egypt and robust foreign direct investment in Morocco have all provided a counterweight.
Limited fiscal reforms have also steadied debt-to-GDP ratios, though Fitch noted that governments remain wary of pressure on social stability.
The region’s average sovereign rating is unchanged from a year ago. Both rating moves in that period, an upgrade for Oman and a downgrade for Bahrain, came before the war began.
Even so, the outlook picture is the bleakest in nearly five years: three sovereigns hold negative outlooks and none holds a positive one, the weakest balance since late 2021.
War-related risks underpin the negative outlooks on Qatar and Ras al Khaimah. Both were recently taken off negative rating watch, a status imposed when hostilities peaked.
Qatar’s outlook stems from its inability to ship liquefied natural gas while the strait remains disrupted. Ras al Khaimah faces threats to a potentially transformative tourism project that had underpinned an earlier upgrade.
Israel also keeps a negative outlook, reflecting an anticipated further rise in public debt and war-linked risks to growth and public finances.
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