S&P Doubles Oman's 2026 Growth Forecast to 3.5% Driven by Resilient Trade Logistics and Energy Sector

S&P Global Ratings has significantly upgraded its economic growth forecast for Oman, projecting a 3.5 per cent expansion for 2026. This positive outlook is driven by favourable trade logistics that help the sultanate maintain the strength of its energy industry amidst ongoing regional tensions involving the Iran war.

The updated projection more than doubles the previous real GDP growth estimate of 1.6 per cent for the sultanate, according to a statement released by the New York-based credit ratings agency on Friday. This figure also surpasses the 2.3 per cent growth rate recorded by Oman last year. Meanwhile, Fitch predicts that GDP will increase by 2.5 per cent in 2027 and 2.4 per cent in 2028.

"Oman’s trade routes remain unobstructed, which will allow the country to grow its oil and gas production capacity," analysts at S&P stated. Oman capitalises on its advantageous geographical position within the Gulf, as its energy exports bypass the Strait of Hormuz, which has served as a major flashpoint during the regional conflict. Key national facilities including the Duqm, Mina Al Fahal, and Salalah ports all possess direct access to the Arabian Sea.

S&P reported that Oman is on track to increase its crude oil production capacity to 1.2 million barrels per day, thereby supporting sustained real GDP growth through 2029. "While non-oil growth could quickly be dampened given the geopolitical situation, [oil production and GDP] are likely to benefit from increased activity levels in the hydrocarbon sector," the analysts noted. "Although some tourism indicators are softer year-over-year, overall non-oil activity in the first half of the year expanded by about 1.3 per cent year-over-year, supported by the trade and logistics, IT and financial services sectors."

In addition to growth forecasts, S&P maintained Oman's long-term credit rating at investment grade with a rating of BBB-, placing it one notch above junk grade, alongside a stable outlook. This investment-grade status facilitates easier access to capital markets and capital-raising efforts when borrowing needs arise. "The stable outlook reflects our opinion that Oman’s fiscal and external buffers – which include liquid government assets in excess of 40 per cent of GDP and gross foreign currency reserves of close to 20 per cent of GDP – will support the sovereign against adverse geopolitical developments," S&P explained.

However, the agency cautioned that its projections could be negatively impacted under a scenario involving a prolonged escalation of attacks by Iran targeting Oman's energy and civilian infrastructure. Like other regional states, the sultanate has previously been targeted by Iranian strikes throughout the seven-month conflict. "We could lower the ratings if Oman’s economic activity or fiscal position deteriorated in conjunction with an escalation of the Middle East conflict," S&P warned. "Downside pressure could also emerge if conflict-related spending increases, reversing the government’s fiscal consolidation efforts."

Parallel to these developments, Oman is actively pursuing a major economic diversification programme to reduce its traditional reliance on crude oil. The US International Trade Administration notes that the hydrocarbon industry continues to play a vital role in supporting Oman’s extensive infrastructure, encompassing electric utilities, roads, public education, and medical services. Furthermore, the sultanate intends to establish a new economic zone centered on artificial intelligence capabilities to accelerate its technology sector and further stimulate the economy.

Oman's strategic cooperation with Gulf neighbours has also strengthened its economic standing. Recent data from Sharjah Customs highlighted that the value of goods transiting through the Sharjah and Oman logistics corridor surged by over 66 per cent during its first three months of operation, as shippers actively sought alternatives to avoid the Strait of Hormuz. "We expect Oman will remain resilient to regional geopolitical conflicts," S&P analysts concluded. "The country has historically maintained good relationships with its neighbours, preserving its traditional role as a neutral player and mediator in the region."

Additionally, S&P projected that Oman's inflation will climb to 2.5 per cent this year before easing to a range between 1 per cent and 2 per cent, aided by a decline in food and transport expenses as supply chain constraints subside.