The impact of the war on Gulf economies’ external positions is diverging sharply, with some states facing severe current account deterioration while others benefit from higher energy prices, Jason Tuvey, a senior Emerging Markets economist with Capital Economics, said in a note on April 30.

“The impact of the war on balance of payments positions across the Gulf varies by country,” Tuvey wrote, noting that Kuwait, Qatar and Bahrain have been “suffering severe blows due to the halt to their energy exports”, with current account positions potentially deteriorating by 20-30% of GDP on an annualised basis. By contrast, “the impact is more ambiguous in Saudi and the UAE, while Oman is benefitting from a terms of trade windfall”.

The disruption stems primarily from the closure of the Strait of Hormuz, which has sharply curtailed energy shipments. “Those with no alternative to the Strait… have been the hardest hit,” Tuvey said, pointing to data showing Kuwait’s oil export volumes fell 97% month on month in March, while Qatar’s LNG exports dropped 91% after operations were suspended.

Saudi Arabia and the United Arab Emirates have partially mitigated losses by rerouting exports. “Capacity constraints have meant that these pipelines have not been able to fully compensate,” Tuvey wrote, estimating export volumes in both countries were down by 40-50%. Oman, which bypasses the Strait, has maintained near-normal export levels.

The war has also disrupted non-oil exports, transport and tourism receipts, and imports. “The UAE is the most exposed,” Tuvey noted, with non-oil goods exports exceeding $300bn and net transport and travel exports equivalent to around 10% of GDP. Meanwhile, “transport and tourism receipts have dried up” as shipping and aviation activity declined sharply.

At the same time, weakening domestic demand has led to a steep fall in imports, partially offsetting export losses in some economies. “The impact on the UAE and Saudi is ambiguous, but probably quite small,” Tuvey said.

Despite these pressures, the region’s large foreign currency buffers provide resilience. “Disruptions due to the war and capital flight would need to escalate and last many years before the dollar pegs were seriously threatened,” Tuvey wrote, adding that recent discussions with the US Treasury on swap arrangements are “best viewed as a way of managing dollar demand rather than any more serious balance of payments strains”.