Mubasher: The Saudi-Iran diplomatic crisis is not expected to lead to major supply disruptions. However, this may exacerbate an OPEC market share competition in the face of forthcoming Iranian oil supplies, and push oil prices lower. In turn, this could increase pressure on GCC pegs, said Bank of America Merrill Lynch in a report.
“We reiterate our view that the core GCC USD pegs, including that of Saudi Arabia, are likely to hold. Oman is the most vulnerable,” it added.
Oman appears most vulnerable in the GCC given low savings, high fiscal and external breakeven oil prices, need for material immediate fiscal cuts, start of debt monetization operations last year (to the tune of 2% of GDP), lack of political succession clarity and the c10% 1986 devaluation precedent, according to the bank.
