Gulf sovereigns are preparing to manage fiscal pressures as breakeven oil prices return to the spotlight, underscoring the region’s ability to adapt to shifting global dynamics, according to a senior ratings executive.
Benjamin Young, managing director, Emerging EMEA Sovereign Ratings at S&P Global Ratings, made the statement in the latest episode of the Middle East Credit Gateway podcast hosted by Hina Shoeb, managing director, head of Analytics, Saudi Arabia Cross Practice Ratings, and Mohamed Ali, director, Market Engagement, at S&P Global Ratings.
Young said fiscal breakeven prices are likely to re-emerge as “critical credit differentiators” over the next year as oil price expectations begin to decline.“We do anticipate downward pressure on prices once strategic reserves are replenished and the market stabilises,” he explained, noting that sovereigns with lower breakevens such as the UAE and Qatar are better positioned to navigate this transition.
He explained that governments’ ability to adjust expenditure, particularly capital projects, will be an important marker of resilience.
“Whether a government might choose to postpone, push back or optimise in some way a project is also an important consideration in judging how vulnerable credits might emerge in a lower oil price environment,” Young said.
Despite volatility in oil markets and geopolitical tensions, Young stressed that Gulf sovereigns have built buffers to withstand shocks. He pointed to Kuwait, Qatar, Saudi Arabia, and the UAE as having “large fiscal assets” that enable them to absorb sharp revenue declines without materially denting government balance sheets.
Growth prospects, however, remain uneven, stated Young, who said average GCC growth in 2026 is expected to contract by 2.5%, before rebounding to slightly above 5% of GDP the following year. The rebound is linked to higher hydrocarbon production, ongoing diversification programmes, and strong domestic infrastructure investments, he pointed out.
According to Young, diversification efforts are also reshaping fiscal profiles. He noted that non-oil fiscal revenue across the GCC has doubled over the past decade to an estimated $260bn, or 36% of GDP, led by Saudi Arabia.
“A wider range of revenue streams usually makes both economies’ fiscal and external revenues less volatile,” Young said, noting that new taxes and levies have strengthened resilience.
Young cautioned that unresolved geopolitical tensions and negotiations around the US-Iran Memorandum of Understanding (MoU) could disrupt recovery and erode longer-term growth potential. However, Young also emphasised that Gulf sovereigns’ fiscal strength and adaptability will remain central to investor confidence.
