Kuwait has retained its high-grade sovereign credit rating from Fitch as strong government finances help fend off the challenges it continues to face amid the US-Iran war.
Opec's fifth biggest oil producer has had to deal with Iranian strikes on its infrastructure that have damaged strategic assets, especially those for energy, and disrupted logistical conditions.
Nevertheless, Fitch kept its AA- on the country, saying the government was supported by its "exceptionally strong fiscal and external balance sheets", the New York-based agency said on Friday.
An Aa2 rating is the fourth-highest on Fitch's scale, only three notches below the top prime grade. Investment grade makes it easier to access capital markets and raise funding when the need to borrow arises.
Analysts at Fitch noted Kuwait's external balance sheet remained "robust", with sovereign net foreign assets rising to 668 per cent of gross domestic product in 2026, up from 652 per cent last year, and more than 10 times the AA median. The bulk of these assets are held in the Future Generations Fund managed by the Kuwait Investment Authority.
Those assets relative to GDP are the highest among all Fitch-rated sovereigns, they said.
Fitch cautioned, however, that the US-Iran conflict, which reignited following the collapse of their ceasefire deal in mid-July, will remain a source of risk for Kuwait's creditworthiness.
"Kuwait has continued to be affected by attacks from Iran ... even if a renewed ceasefire is agreed, there is a high risk that the geopolitical situation will remain unstable and a further escalation remains possible," the Fitch analysts said.
"But we believe that the implications for sovereign risk will remain manageable given the sovereign's large buffers."
The decline in oil production as a result of the strikes, meanwhile, is expected to weigh on GDP this year, Fitch said. Data show that Kuwait's crude production slid by 70 per cent from March to May, at the height of the war, before recovering in June and July.
Fitch expects output to average two million barrels per day in fiscal year 2026, which ends in March 2027, before recovering in the next fiscal period, with the country's average oil price at about $81.40 a barrel for fiscal 2026. Brent seesawed above and below $80 this week as Houthi rebels escalated their attacks in the Red Sea.
"The conflict will continue to affect Kuwait's ability to export oil, given its dependence on the Strait of Hormuz," Fitch said. "We expect some degree of normalisation in the near term, but uncertainty is high and severe disruptions remain possible."
Kuwait has indeed made moves to stabilise its energy sector. Last month, Kuwait Petroleum Company signed a $16 billion leasing agreement with a consortium of investment firms for its crude pipelines.
"Some oil facilities have been damaged, but we believe Kuwait has the capacity to restore production quickly once transit conditions normalise," Fitch said.
Non-oil GDP, on the other hand, is projected to remain in positive territory despite a projected slowdown, while inflation is seen to marginally rise this year before cooling down in 2027, Fitch said.
These will be supported by public infrastructure spending, public sector employment and the central bank's support for the banking sector, it said.
