India Turns to Latin American, African Oil After Hormuz Disruption

Moody's has affirmed Saudi Arabia's sovereign credit rating at "Aa3" with a stable outlook, recognizing the kingdom's economic resilience amid regional geopolitical tensions. The international assessment highlights Saudi Arabia's robust fiscal position, consistent government spending, and the critical role of infrastructure like the East-West pipeline in sustaining trade flows.

The agency's report underscored Saudi Arabia's vast hydrocarbon resources, low production costs, and competitive global energy market standing. Progress under Vision 2030 has fueled solid non-hydrocarbon growth, supported by public investment and structural reforms. Moody's also noted improvements in fiscal and economic transparency.

In a scenario considering continued disruptions at the Strait of Hormuz, Moody's anticipates Saudi Arabia's credit profile will remain stable. This resilience is attributed to the kingdom's capacity to reroute oil exports via the Red Sea and its substantial financial assets. The East-West pipeline is identified as crucial, currently carrying 7 million barrels of crude oil daily, with Red Sea terminals capable of handling up to 5 million barrels per day, representing two-thirds of pre-conflict export levels.

While oil production and export volumes may fall below pre-conflict levels due to the strait's closure, Moody's forecasts that significantly higher oil prices, expected to average $90-110 per barrel in 2026, will offset this. Consequently, Saudi government revenue is projected to exceed pre-conflict expectations, allowing for increased spending on economic support, subsidies, and defense. The agency anticipates improvements in fiscal and external positions, with government debt expected to remain moderate at around 32% of GDP in 2026.

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The pipeline is already carrying 7 mb/d crude oil and the export terminals on Red Sea have been able to load up to 5 mb/d of crude oil equivalent to two-thirds of pre-conflict export levels.