How Gulf countries face different risks if oil prices drop

Dubai: Countries in the Gulf region may be affected differently if oil prices drop, according to a new report by Fitch Ratings. Oil revenue is a major part of government budgets in the Gulf Cooperation Council (GCC), and changes in oil prices could put pressure on public finances.

Fitch estimates that if oil prices average $65 a barrel in 2025—their expected scenario—most Gulf countries will still have budget surpluses. But three countries could face deficits: Saudi Arabia, Bahrain, and, just slightly, Oman.

In a worse-case scenario where oil prices drop to $45 a barrel, all six GCC countries are likely to run budget deficits, unless they change spending or raise more money through other sources.

Gulf governments are trying to balance two things:

Fitch points out that while previous oil slumps led to deep spending cuts that hurt economic growth, recent reforms—like new taxes, investment plans, and business-friendly policies—have helped grow the non-oil economy in the region. But if oil prices fall sharply again, that progress could be tested.

Overall, the report shows that while the Gulf is better prepared than before, some countries are more financially vulnerable to oil price changes than others, based on how much they rely on oil to fund government budgets.