Oman's economy to grow 3.5% in 2026 on favourable trade logistics, S&P says

Oman's economy is expected to expand by 3.5% in 2026, according to S&P Global Ratings, due to favorable trade logistics that will help the nation maintain its energy sector strength during the Iran war. This projection exceeds the previous estimate of 1.6% real GDP growth. The agency raised its forecast for the sultanate's GDP growth to more than double the previous estimate.

S&P analysts note that Oman's trade routes remain unrestricted, which allows the country to expand its oil and gas production capacity. Located in a strategic position in the Gulf, Oman's energy exports are not dependent on the Strait of Hormuz, a contentious area during the regional conflict. The Duqm, Mina Al Fahal, and Salalah ports are all connected to the Arabian Sea, enabling smooth trade operations.

Oman's crude oil production could potentially reach 1.2 million barrels per day, contributing to real GDP growth through 2029. While non-oil growth may suffer due to the geopolitical situation, oil production and GDP are likely to benefit from heightened activity in the hydrocarbon sector. Despite some year-over-year softness in tourism indicators, overall non-oil activity in the first half of the year grew by approximately 1.3% year-over-year, driven by trade and logistics, IT, and financial services.

S&P has maintained Oman's long-term credit rating at investment grade (BBB-), one notch above junk grade, with a stable outlook. This rating reflects the country's fiscal and external buffers, which include liquid government assets exceeding 40% of GDP and foreign currency reserves amounting to nearly 20% of GDP. However, the agency warns that its forecasts may be affected by a prolonged escalation of Iranian attacks on Oman's energy and civilian infrastructure.

If the situation deteriorates, S&P could lower Oman's ratings or pressure could emerge if conflict-related spending surpasses the government's fiscal consolidation efforts. Oman is also actively pursuing an economic diversification plan, shifting away from its reliance on crude. The country aims to boost its technology sector by developing artificial intelligence capabilities and expanding its infrastructure, including electric utilities, roads, public education, and medical services.

Oman's collaboration with Gulf neighbors has also bolstered its standing. For instance, the value of goods passing through the Sharjah and Oman logistics corridor increased by over 66% in its first three months of operation as shippers sought to circumvent the Strait of Hormuz. S&P analysts express confidence in Oman's resilience to regional geopolitical conflicts, highlighting the country's tradition of maintaining good relationships with its neighbors and serving as a neutral mediator in the region.