Qatar returns to the international bond market! Blocked by the Strait of Hormuz, LNG revenue plummets from $9 billion to $200 million.

Qatar has returned to the public international bond market to raise funds after several months, as the disruption of shipping in the Strait of Hormuz caused by the US-Iran war has drastically worsened the financial situation of this wealthy Gulf nation.

According to media reports on the 21st, citing sources familiar with the matter, the Qatari government is issuing dollar bonds with maturities of 5 years and 10 years. The initial guidance for the spread is approximately 85 basis points above the US Treasury benchmark for the 5-year bond and 95 basis points for the 10-year bond. The final pricing and issuance size are expected to be announced later on Monday, with a target of the benchmark size, or at least $500 million. The issuance is jointly managed by Goldman Sachs and HSBC Holdings.

The disruption to shipping through the Strait of Hormuz has dealt a particularly heavy blow to Qatar, which relies on this waterway to export liquefied natural gas (LNG), its primary source of export revenue. According to data from the Qatari Ministry of Finance, LNG revenue plummeted to just $200 million in the second quarter of this year, a staggering 97% drop from $9 billion in the first quarter. Meanwhile, Qatari Finance Minister Ali Al-Kuwari, speaking at the Qatar Economic Forum in New York on Sunday, called for an immediate end to the conflict, stating that the country urgently needs "breathing space" to return to economic development.

Fiscal pressure: Record quarterly deficit

The impact of the US-Iran conflict on Qatar's finances is becoming increasingly apparent in the data. According to a research report by JPMorgan economist Francesco Arcangeli on September 14, Qatar recorded a budget deficit of $5.8 billion in the second quarter, equivalent to 11.4% of its GDP for that quarter, marking the largest single-quarter fiscal shortfall on record.

JPMorgan data shows that government revenue fell 57% year-on-year in the quarter, almost entirely due to a sharp decline in oil and gas revenue. A Bloomberg survey of economists predicts that Qatar's economy will shrink by 12.1% for the whole year, the worst performance among all the countries surveyed.

Qatar issued $3 billion in bonds in the private market in April, but had not previously entered the public international bond market. This bond issuance marks its first public bond offering this year.

Strong buffer: Sovereign wealth funds and high credit ratings provide a safety net

Despite fiscal pressures, Qatar possesses considerable resilience. The country boasts a sovereign wealth fund of approximately $580 billion and foreign exchange reserves exceeding $70 billion. Standard & Poor's rates it at AA, on par with the UK and South Korea.

This credit endorsement provided crucial support for the bond issuance. However, the duration of the fiscal buffer largely depends on when the Strait of Hormuz resumes normal navigation. Currently, some oil and gas cargoes can still pass through the strait under US military escort, but the flow of these goods is still significantly lower than before the conflict.

Qatar has been a key mediator between the US and Iran. Finance Minister Ali Al-Kuwari stated at a forum in New York that he hopes the two sides can reach an agreement and achieve peace, emphasizing that Qatar needs to refocus its attention on its economic agenda and diversification transformation.

Energy Secretary Saad Al-Kaabi used even stronger language at the same event. He criticized U.S. Treasury Secretary Scott Bessant's claim that the Strait of Hormuz could be abandoned within two years as "completely wrong," insisting that a full reopening of this vital shipping route was crucial.

However, judging from current indications, the willingness of both the US and Iran to resume peace talks is unclear, and the external pressures facing the Qatari economy are unlikely to be fundamentally alleviated in the short term.

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