Hormuz Closure Would Cost Gulf States Average 3.8% of GDP, Marex Warns as Bahrain Most Exposed

Why It Matters

The scenario underscores how geopolitical chokepoints can instantly destabilize fiscal positions across the Gulf, prompting policymakers to reassess export diversification and liquidity safeguards.

Key Takeaways

• Bahrain current account swings from +3.8% to -3.2% GDP
• Saudi and UAE losses limited to ~1% GDP via pipelines
• Oman could turn deficit into 6.1% surplus
• Oil price must hit $169/$155 to offset Saudi/UAE impacts
• Sovereign wealth funds may not cover prolonged closure liquidity

Pulse Analysis

The Strait of Hormuz remains a critical artery for global oil flows, handling roughly a third of the world’s petroleum exports. Marex’s latest modeling shows that even a temporary three‑month blockage could shave 3.8% off the average current‑account balances of Gulf economies, a shock comparable to a severe recession in many advanced markets. By anchoring the scenario to a $120 per barrel oil price, the firm highlights the razor‑thin margin between normal revenue streams and fiscal distress when supply routes are constrained.

Not all Gulf states are equally vulnerable. Saudi Arabia and the United Arab Emirates have invested heavily in east‑west pipelines that can reroute up to 35‑40% of their output to Red Sea ports, limiting their GDP impact to about 1%. In contrast, Bahrain, with no alternative export corridor, would see its surplus evaporate and fiscal deficit widen dramatically. Oman, positioned outside the Gulf’s traditional trade loop, could capture rerouted freight and swing from a 0.7% deficit to a 6.1% surplus, illustrating how geographic positioning can turn a crisis into an opportunity.

The findings raise urgent policy questions. While sovereign‑wealth funds provide a short‑term cushion, their liquidity may be insufficient for an extended shutdown, forcing central banks to step in and support domestic banks. Moreover, the analysis suggests oil prices would need to climb to $169 per barrel for Saudi Arabia and $155 for the UAE to fully neutralise current‑account losses, a level that could trigger broader market volatility. Decision‑makers must therefore weigh infrastructure resilience, diversification of export routes, and fiscal safeguards to mitigate the systemic risk posed by chokepoint disruptions.