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Iran's Soleimani killing has rapidly escalated Gulf event risks - S&P Global

FILE PHOTO: Demonstrators hold placards depicting Iranian Major-General Qassem Soleimani, during a protest against killing of Soleimani, head of the elite Quds Force, who died in an air strike at Baghdad airport, outside U.S. Consulate in Istanbul, Turkey, January 5, 2020. REUTERS/Murad Sezer/File Photo

LONDON (Reuters) - Bahrain, Qatar and Oman’s sovereign ratings would be the most vulnerable to a protracted and wider conflict in the Gulf region following the killing of Iran’s top military commander Qassem Soleimani, S&P Global said on Monday.

If tensions continued to escalate, the fiscal boost that could come from higher oil prices would likely be offset by capital outflows and weaker economic growth, a group of S&P’s analysts said in a report.

“We view Bahrain and Qatar as more vulnerable to outflows given their high external financing needs, relating to their respective banking sectors,” they said.

“Oman’s reliance on external debt is a key contributor to our negative outlook on the ‘BB/B’ sovereign rating; a higher risk premium in the event of escalating conflict could further pressure already-rising debt-servicing costs.”

Abu Dhabi, Kuwait, Saudi Arabia as well as Qatar again should be “better cushioned by their large stocks of deployable government external assets”, while Iraq’s ‘B-’ rating already incorporated a high degree of political risk, the report added.

Reporting by Marc Jones; Editing by Ritvik Carvalho