Why Gulf Dollar Pegs Are Strained by Oil and Virus: QuickTake

Why Gulf Dollar Pegs Are Strained by Oil and Virus: QuickTake

As Saudi Arabia embarked on an oil-price war in March by boosting crude production, traders were betting through the derivatives market that the region's currencies would weaken within a year.. Currency pegs are now largely confined to the major oil producers in the Middle East which appear unwilling to let them go.. Most of the Gulf countries remain heavily reliant on hydrocarbons to pay the bills -- Saudi Arabia gets around two-thirds of its revenue from oil and Kuwait about 90% -- so the slump in prices has put the region's economies under huge stress.. Saudi Arabia, the U.A.E., Kuwait and Qatar all have the firepower in the form of sizable currency reserves to defend their pegs.. Bahrain requires an oil price of $95.6 a barrel to balance its budget, while Oman needs $86.8, the highest in the GCC, according to the IMF.. As the largest non-OPEC oil producer in the Middle East, Oman faces a seventh straight year of budget deficit, with this year's set to widen to 17.5% of GDP from 9.7% in 2019, according to S&P Global Ratings.. Given that dollar-priced oil and gas remain the dominant exports, the region's economies would be unlikely to gain much