Qatar has made its return to the public international bond market after several months away, as shipping disruptions in the Strait of Hormuz triggered by the US-Iran conflict have sharply deteriorated the Gulf state's fiscal position.
According to sources familiar with the matter cited by media on the 21st, the Qatari government is issuing US dollar bonds across five-year and ten-year tenors, with initial spread guidance of approximately 85 basis points over US Treasuries for the five-year and 95 basis points for the ten-year. Final pricing and deal size are expected to be announced later on Monday, with the offering targeting benchmark size, meaning at least $500 million. The issuance is being jointly managed by Goldman Sachs Group Inc and HSBC Holdings Plc.
The blockage of shipping through the Strait of Hormuz has dealt a particularly heavy blow to Qatar. The country depends on this waterway to export liquefied natural gas (LNG), which is its primary source of export revenue. According to data from Qatar's Ministry of Finance, LNG revenue in the second quarter of this year plunged from $9 billion in the first quarter to just $200 million, a staggering quarter-on-quarter decline of 97%. Meanwhile, Qatari Finance Minister Ali Al-Kuwari called for a swift end to the war at the Qatar Economic Forum in New York on Sunday, stating that the country urgently needs "breathing room" to get back on track toward economic development.
Fiscal Strain: Record-Breaking Quarterly Deficit
The impact of the US-Iran conflict on Qatar's finances is now fully evident in the data. According to a research note from JPMorgan economist Francesco Arcangeli dated September 14, Qatar recorded a budget deficit of $5.8 billion in the second quarter, equivalent to 11.4% of GDP for that quarter, marking the largest single-quarter fiscal gap on record.
JPMorgan's data shows that government revenue fell 57% year-on-year in that quarter, almost entirely attributable to the sharp contraction in oil and gas income. A Bloomberg survey of economists projects that Qatar's economy will shrink by 12.1% for the full year, the weakest performance among all countries surveyed.
Qatar had issued $3 billion in bonds through the private placement market in April of this year, but had not yet accessed the public international bond market until now. This issuance represents its first public debt offering of the year.
Strong Buffer: Sovereign Wealth Fund and High Credit Rating Provide Support
Despite the fiscal pressure, Qatar still possesses considerable resilience against risk. The country holds a sovereign wealth fund of approximately $580 billion, foreign exchange reserves exceeding $70 billion, and a Standard & Poor's rating of AA, placing it on par with the United Kingdom and South Korea.
This credit backing provides important support for the current bond issuance. However, how long the fiscal buffer can last depends largely on when the Strait of Hormuz returns to normal navigation. Some oil and gas cargoes can still pass through the strait under US military escort, but commodity flows remain significantly lower than before the conflict erupted.
Qatar has been a key mediator between the US and Iran. Finance Minister Ali Al-Kuwari expressed hope at the New York forum that the two sides could reach an agreement and achieve peace, emphasizing that Qatar needs to refocus its attention on its economic agenda and diversification transition.
Energy Minister Saad Al-Kaabi struck a firmer tone at the same event. He criticized US Treasury Secretary Scott Bessent's claim that the Strait of Hormuz could be "rendered obsolete within two years" as "completely wrong," insisting that a full reopening of this vital shipping route is essential.
However, based on current indications, neither the US nor Iran appears clearly willing to resume peace negotiations, meaning the external pressures on Qatar's economy are unlikely to be fundamentally alleviated in the near term.