Moody’s Warns of Indirect Risks to MENA from New U.S. Tariffs, Highlights Oil Price Concerns

The Middle East and North Africa (MENA) region is unlikely to face direct economic fallout from the latest round of sweeping U.S. tariffs, but could suffer from broader global economic consequences, according to a new report from Moody’s Investors Service.

The credit ratings agency noted that the Trump administration’s newly imposed 10 percent universal import tariff — and additional duties of up to 145 percent on Chinese goods — will largely bypass the MENA region due to the exclusion of oil and gas from the tariff list. Still, the report warns that indirect impacts through slowing global growth, declining oil prices, and investor caution could strain credit and fiscal conditions across the region.

Moody’s findings are consistent with an earlier analysis by PwC, which also predicted limited direct exposure but warned of second-order effects on MENA economies.

“Exemption of oil and gas from the new U.S. tariff scheme limits the size of the region’s affected exports to a relatively small share of GDP, except for Jordan,” the Moody’s report stated.

However, the broader repercussions may be more damaging. The agency cited weakened global demand and falling investor confidence as key risks. Brent crude prices have already dropped to around $65 per barrel in April — down 20 percent from the 2024 average — reflecting concerns over sluggish global growth.

Oil-exporting countries in the GCC, including Saudi Arabia, Kuwait, Iraq, and Bahrain, are particularly vulnerable to prolonged low oil prices. “These countries face varying levels of fiscal exposure, with Bahrain most at risk due to its high debt levels and limited financial buffers,” Moody’s said.

Lower oil revenues may also hinder the rollout of infrastructure projects and slow economic diversification initiatives, weighing on near-term growth prospects for non-oil sectors.

The financial sector, too, could feel the pressure. According to Moody’s, banks across the region may experience slower loan growth, tighter margins, and weaker asset quality if economic activity softens. Real estate and construction — key loan sectors — are especially vulnerable to reduced investor confidence and government spending cuts.

While Gulf banks remain well-capitalized with strong liquidity, Moody’s warned that a global economic slowdown could compel sovereign wealth funds to borrow more to sustain public investment and diversification programs.

Despite the uncertainty, the IMF has projected that MENA’s economic growth will reach 2.6 percent in 2025 and rise to 3.4 percent in 2026, driven largely by non-oil sector expansion.