GULF WEEKLY: War restarts after pause, Saudi deficit narrows, Kuwait privatizes pipelines

GULF COUNTRIES - Report 31 Jul 2026 by Justin Alexander

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A skimmable summary overlaid with our analysis and links. Headlines:

* After a brief pause, the US-Iran conflict restarted, although oil remains well down from last week, at about $87.
* The Houthis and allied Iraqi militias attacked Saudi oil sites and tankers, prompting counterstrikes.
* There was an attack on two LNG vessels in Egypt’s Damietta port; Iran has denied involvement.
* The Saudi Q2 deficit narrowed sharply, to -2.6% of GDP, on strong oil royalties, but spending growth was 11% y/y.
* The Saudi Q2 flash GDP showed a -2% q/q contraction in the non-oil private sector, the first since Covid.
* The IMF Saudi Article IV sees non-oil growth at 2.6% this year and a deficit of -3.7% of GDP.
* UAE NPLs fell to a record low of 2.8% as of June.
* Fitch appears to have internally placed (unrated) Dubai on a negative outlook, given its action on GRE Salik.
* The US-UAE AI partnership strengthened as the US government invested in Mubadala’s chipmaker GlobalFoundries.
* Kuwait’s official reserves dropped by -7% m/m in June, but bank deposit growth remained strong with public support.
* KPC sold a 49% stake in its oil pipeline network for $7.8bn to Blackstone, Brookfield and KKR.
* An Iranian strike killed a worker on a Chinese construction project in northern Kuwait.
* Moody’s sees Oman achieving a fiscal surplus averaging 5% of GDP in 2026-27 and debt falling to 30% of GDP.
* OQ is preparing to tender a contract to dramatically expand its Ras Markaz oil storage facility to 200m barrels.
* Bahrain maintained a current account surplus of 5.6% of GDP in Q1, but saw significant capital outflows.
* Fitch’s new forecasts for Bahrain see a -20% of GDP deficit and debt rising to 179% of GDP this year. It expects GCC support.
* Databank updates: Saudi fiscal & GDP, Bahrain BoP, Bahrain inflation, forecasts for Saudi, Oman and Bahrain.