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GCC companies are bracing for a potential storm as trade tensions and declining oil prices threaten the region’s economic outlook, S&P Global Ratings said in a report.
The ratings agency has lowered its oil price assumptions for Brent and West Texas Intermediate (WTI) by $5 per barrel for the remainder of 2025, citing a potentially oversupplied market.
“GCC companies will probably see contagion from a decline in oil prices and a global economic slowdown rather than from the tariffs themselves,” the report said.
While the direct impact of tariffs on GCC companies is expected to be limited, slower global GDP growth could reduce demand for chemicals and industrial goods in the medium to long term.
S&P noted that despite diversification efforts, GCC countries’ economic growth remains closely tied to oil prices. The agency revised its outlook on Bahrain to negative due to the impact of weaker oil prices and market volatility on the country’s public finances.
Geopolitical risks, particularly tensions in the Middle East, also pose a threat to the region.
“Global geopolitical risks are, in our view, at their highest level in decades, posing a serious threat of economic disruption,” the report warned, adding that a potential closure of the Strait of Hormuz could disrupt oil exports and raise funding costs.
The report, authored by Sapna Jagtiani, director and lead analyst, Middle East Corporate Ratings, acknowledged that 61 per cent of rated GCC companies are investment-grade, and the outlook bias for these companies remains stable.
However, significant capital expenditure requirements, driven by government spending and projects like Saudi Vision 2030, coupled with substantial refinancing needs and persistent geopolitical risks, could strain corporate balance sheets.
S&P expects that the US Federal Reserve will only lower its policy interest rate by 25 basis points this year. “Widening spreads could keep all-in financing costs elevated,” the report said.
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