Fitch confirms Qatar's credit rating and says that the strong LNG push will help to reduce conflict risks

Fitch Ratings confirmed Qatar's long term foreign currency rating as "AA" with a "stable outlook" on Friday. It said that Qatar's strong balance sheet and its plans to increase LNG production should help cushion the impact of the escalating Middle East conflict.

The U.S. and Israel war against Iran has caused disruptions in shipments through the Strait of Hormuz. This is the most important oil route on the planet, responsible for 20 percent of the global oil supply.

Qatar's fiscal gap in 2026 will likely be widened by the?impact of LNG exports. This depends on the length of the conflict. However, the country can rely on its sovereign fund, the Qatar Investment Authority, which has amassed assets over decades.

Fitch assumes that the conflict will last for less than one month, and the Strait will remain closed. There won't be any major damage done to the hydrocarbon infrastructure in the region. According to its baseline scenario the agency expects Brent crude oil to average $70 per barrel by 2026.

Fitch predicts that as LNG production grows, the government's budget surplus will reach 4.1% in 2027 and exceed 7% by 2030. The budget, excluding investment income, is expected to return in surplus by?2027. Most of the excess revenue will be transferred to QIA to invest overseas.

The agency believes that Qatar will be able to meet its?funding requirements by 2026 through a combination of?central bank overdrafts?, domestic and international market borrowing?, as well as drawdowns from the finance ministry?s deposits?in the banking sector?. Reporting by Aatrayee chatterjee and Rachna uppal in Bengaluru; editing by Shilpimajumdar

(source: Reuters)