RIYADH: Abu Dhabi and Qatar retained their high-grade sovereign credit ratings as strong fiscal buffers and sovereign wealth assets helped offset risks stemming from the Iran war.
Fitch Ratings maintained Abu Dhabi’s Long-Term Foreign-Currency Issuer Default Rating at ‘AA’ with a stable outlook, saying the emirate’s exceptionally strong fiscal and external balance sheets despite ongoing geopolitical risks from the Iran war.
In its latest report, the agency said the rating also reflects Abu Dhabi’s high gross domestic product per capita, low government debt, and robust sovereign net foreign assets.
The latest rating underscores Abu Dhabi’s position as a safe business haven in the region, even as some infrastructure in the Emirates was hit during the Iran war, resulting in limited casualties and short-term business disruption.
An AA rating indicates excellent financial strength and stability for an entity, though slightly below the ultra-safe AAA level.
“The stable outlook reflects the resilience of oil export revenue during the Iran war, which significantly offsets the negative impact of the war, as well as abundant fiscal and external buffers,” said Fitch Ratings.
According to the report, Abu Dhabi’s economy is expected to shrink by 1 percent in 2026, with both oil and non-oil activity contracting.
“The closure of the Strait of Hormuz will be mitigated by a rise in oil production to 3.3 million barrels per day (mmbpd) post-war. We expect the non-oil economy to return to growth rapidly, although at a slower pace than pre-war, and to remain heavily dependent on government-related entities-funded projects,” added Fitch.
The report further said that Abu Dhabi’s rating could be upgraded if the emirate achieves further reductions in its dependence on oil, strengthens governance standards, and sees a de-escalation of geopolitical risks in the region, while continuing to maintain its strong fiscal and external balance sheets.
On the downside, a prolonged deterioration in the security environment, which could include greater disruption to Abu Dhabi’s ability to export oil and gas due to significant damage to energy production, could result in a credit rating downgrade.
In a separate report, S&P Global has affirmed its ‘AA/A-1+’ long- and short-term foreign and local currency sovereign credit ratings on Qatar with a stable outlook.
The report attributed the stable rating to the country’s sizable accumulated fiscal and external assets, which are expected to help it weather a period of heightened security and trade flow disruption risks linked to the Middle East conflict.
“Despite the regional conflict and its impact on gas production, our ratings on Qatar remain supported by the country’s sizable external and fiscal net asset stock positions, underpinned by money within the sovereign wealth fund, the Qatar Investment Authority, as well as other funds,” said S&P Global.
S&P Global said the rating assumes the conflict will remain limited in duration and that hostilities will stay contained without significant further damage to the country’s production facilities.
The report further said S&P could raise Qatar’s sovereign ratings if external risks ease, requiring a sustained reduction in the country’s external financing needs combined with a notable improvement in data transparency, particularly regarding government external assets.
The rating could be downgraded if the ongoing conflict in the region affects the country’s production or exports, including through significant damage to key gas production facilities in Qatar or a prolonged blockage of the Strait of Hormuz.
