Speaker 1You're listening to The Decisive Podcast, insights and analysis to empower confident decision-making. Welcome to The Decisive. I'm your host, Kristen Hallam. Today, we're bringing you highlights from a July 15th webinar, Beyond Disruption, the next chapter for GCC Trade, Investment and Growth. The discussion features S&P Global Market Intelligence experts Kevin Lim, Principal Research Analyst for Middle East and North Africa Country Risk, Chris Rogers, Head of Supply Chain Research, and Jamil Nayyem, Associate Director for Middle East and North Africa Economic Forecasting. In a discussion led by Ralph Wiegert, who leads the Middle East and North Africa Economic Forecasting team, they examine how Gulf trade routes may evolve beyond temporary disruption, where competition for market share could intensify as trade flows shift, how resilience priorities may reshape policy and investment plans, and what these changes could mean for growth, fiscal outlooks, credit risks, and emerging opportunities across the region. Let's listen now.
Speaker 2Chris, what have you seen in terms of trade flows so far? Have global buyers been able to find new sources?
Speaker 3Yeah, thanks, Ralph. So I would say when we look at the data itself, the reminder that we get is how slowly maritime supply chains actually move. So typically, shipping goods from the Middle East to the key manufacturing centers in Asia can take between four and six weeks. So even when the strait closed, goods have continued to flow. What we've actually seen is that whilst there's been a rise in upstream energy, what we've actually seen is that generally for crude oil and refined fuels, whilst imports into the major manufacturing centers, China, Japan, Singapore, Taiwan, actually their shipments of refined fuels, they've replaced the 60 or 70% reduction in what they're getting from the Middle East with supplies from the rest of the world. And of course, their own stockpiles as well. When we start to look at some of the downstream products, particularly petrochemicals, ethylene polymers, propane, etc., and then we start to look at some of the downstream products, that are used in plastics, which are used in pretty much any manufactured good, actually global buyers have not been able to find alternative sources. And in fact, for those big Asian centers, we've seen drops of between 30 and 40% in May versus earlier in the year. For some of the other more specialty products, less of an issue, unwrought aluminum, particularly where there's been attacks on plants in the region that have led potentially to a longer-term reduction in available aluminum. But we've actually only seen a minor decline overall in global shipments of that product. And that's partly because there's oversupply. So generally what we've seen is depending on the product, there are global supplies available, but the plastic supply chains in particular are the most heavily impacted. We'll only really begin to see that feed through into supply chain activities during the rest of the third quarter and into the fourth quarter, which are the peak manufacturing and sales seasons. for a lot of those goods. So I think, Ralph, the general message is mixed so far,
Speaker 2but generally buyers have struggled. Thank you, Chris. Jamil, what does the latest economic data tell us for the GDC countries? Thanks, Ralph. The numbers are telling us a story.
Speaker 4So S&P Global Market Intelligence's own PMI, the Purchasing Manager's Indices, had gauged the performance of non-hydrocarbon sectors, suggest a tentative improvement of supply conditions across the GCC in June. Suppliers' delivery times actually shortened in the UAE and Saudi Arabia in June because firms adapted trade routes and regional shipping conditions improved. They also shortened in Qatar, along with a modest pickup in input buying. And all this suggests that supply chains are capable of normalizing, even as demand remains uneven and confidence remains dependent on geopolitical conditions.
Speaker 2Thank you for this, Carl. Let's dive a little deeper into the subject. Kevin, when clients talk about homeless alternatives, how should they distinguish temporary from permanent bypass routes?
Speaker 5Look, the first distinction is between quote-unquote quick-fix workarounds that preserve continuity and infrastructure that alters their default routing logic. So temporary bypass routes keep flows moving in the near term, even when a strain of homeless is not actually physically closed off. But transits nonetheless remain under threat of attack or are commercially difficult because of insurance permits, ship owner risk tolerance levels. In that environment, supply chains must adapt. So think ship-to-ship transfers outside of the strait of homeless. Think feeder services going into alternative ports and overland trucking. These are quick to deploy, but are constrained by logistics capacity, cost, and insecurity. Permanent bypass pathways are more scalable and comprise central assets and network investments designed to reduce specifically structural dependence on port moves. There are three broad categories. Number one, energy pipelines and associated export terminals. So examples include Saudi Arabia's east-west petrol line to Yanbu and the UAE's Hapsha Fujairah pipeline, both of which already exist and have operated through this wall. These assets offer permanent routable capacity rather than relying on ad hoc shipping or trucking workarounds. The second category is port rerouting and port capacity outside the strait. So during the active high-intensity phase of the war, port calling patterns shifted. We saw, for instance, hot calls at the Jabil Ali, Khalifa Port and Damam within Gulf waters decline significantly, while Khor Fakkan and Jeddah outside the straits saw relative gains. That pattern reflects a system that has learned it can effectively re-anchor flows and hence adapt. The third category is actually overland rail and corridor connect, which is slower and more complex. Now we have a lot of multi-modal routes combining shipping and rail and roads that freight movers or state have aimed more fully operationalizing. There is also the GCC railway project, construction of which remains incomplete, and it also faces and will continue facing soft infrastructure bottlenecks, such as agreements over customs, procedures and jurisdictional responsibility for cross-border operations, freight rail operations. Railway freight will also not be a full substitute for sea freight. So this is a very important part of the GCC railway project. But structurally, it is part of that longer-term permanent bypass logic, reducing exposure around a single point of failure, which in this case is Hormuz. Let's be clear, the Gulf will not be Hormuz-free, right? Instead, it will become more layered, more networked, more diversified. Even if we assume that even if transits were to normalize the pre-war levels today, we think that this broader bypass narrative will carry momentum, certainly for as long as regional states assess an ongoing Iranian war.
Speaker 2And in practical terms, Kevin, what alternatives to the Strait of Hormuz should clients be watching most closely?
Speaker 5So the most important near-term developments are still oil-focused. And the most prominent project I'll mention here is the second West-East crude pipeline to Fujairah on the Gulf of Oman that the UAE has been developing and is aiming to finish by next year. So the existing parallel Hapshan-Fujairah routes mentioned earlier already allows the UAE crude to reach a terminal outside the Straits. And the additional capacity under development would materially increase that option.
Speaker 2And who are the main beneficiaries if these Hormuz bypasses and wider GCC infrastructure upgrades continue to advance?
Speaker 5Sure. So great question. So broader benefits would also come from the way that project-adjacent sectors networked. So, for example, if you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, and you have an area in the Gulf of Oman, a fully functioning regional rail system would give, I'm thinking, manufacturers, retailers, logistics firms, and ports a more predictable inland freight option. And this will help reduce transit times, reduce lower cross-border fictions, and it will help connect industrial zones more broadly and more efficiently with seaports and consumer markets. The main beneficiaries would therefore include logistics hubs, industrial zones, we have port operators, freight forwarders, warehousing providers, and wholesale and retail firms trading across GCC borders. For governments, specifically, the strategic gain is that rail and corridor integration supports diversification by making GCC economies operate more like an integrated market, rather than as separate and sometimes disjointed national trade and logistics ecosystems. So in that sense, while Hormuz bypasses remain important for the GCC economy, it's also important for the GCC economy to be more resilient. The bigger long-term upside is stronger non-oil connectivity, higher intra-GCC trade, and more private sector investment in regional value chains.
Speaker 2Now, as rail, ports, and bypass corridors become more central to GCC integration, the next question is whether these assets are resilient enough to withstand disruption.
Speaker 5What is your take there? Excellent question. So even permanent assets will remain So I'll report that strategic planning report is clear that pipeline and terminal infrastructure remain and will remain exposed to the same type of security risks. The difference is that number one, Iran's perception of sovereign control over the Strait of Hormuz makes it easier for Iran to continually focus on restricting shipping as continues to be the case. And a second difference is that if attacked, bypass routes can still be repaired or rebalanced more quickly. And the existence of multiple routes reduces the probability that a single attack fully collapses export or import capacity.
Speaker 2Now let's look at the beneficiaries from an economic perspective. Jamil, from a macro perspective, are there sectoral spillovers that matter for growth momentum, for the growth outlook?
Speaker 4Yes, in a nutshell, sectors that stand to benefit the most are energy, construction, infrastructure, and services, including financial intermediation and insurance. That would help sustain economic activity momentum or support it and allow for a further expansion of the non-oil sectors in the next few years, provided fiscal discipline is maintained and execution capacity is not overwhelmed. Right. For now, let's look a little bit further
Speaker 2on the GDC's strategic role in global supply chains. Even before long-term adaptations in the form of infrastructure, et cetera, Hormuz bypassed the global supply chain. The GDC's strategic role in global supply chain is to ensure that the energy, infrastructure, and services, and services, and so on, can be put into place. We need to see short-term recovery. What do you see the time to recovery being, Chris?
Speaker 3Yeah, thanks, Ralph. So I think clearly, as I mentioned earlier, different products are being affected in different ways, and so will take different amounts of time to recover. Now, when we're thinking about the energy sector, oil, refined oil, natural gas, the recovery time is going to be a lot longer. Yeah, absolutely. And I think the recovery times can be relatively swift. These are globally fungible goods. Obviously, different grades of oil will make a difference. I think one of the questions to ask, though, is not how quick will recovery be, what does recovery look like? Certainly, we've seen within the energy space and to a lesser extent in industrial materials that companies have been willing to draw down their stockpiles. We've seen that in oil with both mainland China and the US pulling on their strategic role. We've seen that in oil with both mainland China and the US pulling on their strategic reserves. And we may well see more of that now that we appear to have rolling disruptions occurring to shipping through the region. But generally speaking, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of inventories, we're going to see recovery take until well into 2027. And in fact, if, to take an example of those ethylene polymers I mentioned earlier, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. And in fact, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, if we only saw a return to previous levels of flows, we're going to see recovery take until well into 2027. So I think it's a necessary but not sufficient condition for success. Yeah, thank you. And how will success look like for GUC exporters and governments? Yeah, clearly, in very simplistic terms, success looks like a return to previous trade flows, right? So this kind of pattern I mentioned, where they have around a fifth of flows of petrochemicals, somewhat lower in global aluminium, but getting back to those levels is clearly an area of success. So this kind of pattern I mentioned, where they have around a fifth of flows of petrochemicals, somewhat lower in global aluminium, but getting back to those levels is clearly an area of success. When we look at some of the more recent port developments, some of the investments made, actually, the GCC port authorities have done a great job of putting those assets into service. If we look at the larger port moves, so around 2,000 to 2,500 containers per vessel, what we're seeing is that the minutes per container move in Hamad, Jebel Ali and Jeddah are actually as good as anything else we see in the world, particularly Singapore and Shanghai, which have high levels of flow. If we look at the larger port moves, so around 2,000 to 2,500 containers per vessel, what we're seeing is that the minutes per container move in Hamad, Jebel Ali and Jeddah are actually as good as anything else we see in the world, particularly Singapore and Shanghai, which have high levels of flow. If we look at the larger port moves, so around 2,000 to 2,500 containers per vessel, what we're seeing is that the minutes per container move in Hamad, Jebel Ali and Jeddah are actually as good as anything else we see in the world, particularly Singapore and Shanghai, which have high levels of flow. If we look at the larger port moves, so around 2,000 to 2,500 containers per vessel, what we're seeing is that the minutes per container move in Hamad, Jebel Ali and Jeddah are actually as good as anything else we see in the world, particularly Singapore and Shanghai, which have high levels of flow.
Speaker 2GEC countries have been following in the last couple of years. Also, looking at the policy logic behind the bypass build-out, are the GCC vision plans still on course or have recent developments superseded them?
Speaker 4Thanks, Rod. That's actually an interesting question. I'd say that the vision plans are still on course, but they're being refrained. So the underlying objectives, boosting competitiveness, building on all capacity, diversification remain. What's changing is the prioritization lens. So after corridor shocks, resilience is no longer an add-on to competitiveness. It is part of it. So project pipelines that boost energy security, trade continuity, logistics reliability, they become more attractive. On the other hand, projects that rely on stable, long duration. Expectations may face slower sequencing because the macro risk and the security risks are changing financing assumptions and delivery timelines. And what has changed most since the Iran war is the way projects are being funded rather than the long term ambition itself. Lenders and investors are now building larger cushions for uncertainty. So they're asking for more compensation for risk. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher.
Speaker 2So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher.
Speaker 4So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher. So funding is likely easier for projects where revenue is higher.
Speaker 3So funding is likely easier for projects where revenue is higher. and maintained so for example we see very often at a micro scale in a plant at a larger scale we've seen with the issues around the panama canal the companies put in place coping mechanisms to deal with the low water levels that we typically get in an el nino year so planning can be done there we've seen it to a certain extent as well with tariffs where companies have gone okay today is another round of tariffs we adapt our supply chain to deal with tariffs generally but we know that those individuals areas will be limited the challenge here is the unpredictability of the recovery curve as we've talked about we have a conflict that we had a period of the memorandum of understanding pieces broken down a bit that's leading to on again off again issues for transits through the through the straight for all of the different product areas and what we may find ralph is that as overseas buyers try and deal with this continued volatility they may well say actually it's just going to be easier to cut the middle east supplies out of our supply chain altogether and i think that continual stumbling over the reopening is the main momentum
Speaker 2challenge facing supply chains at the moment thank you now let's have a brief overview from all presenters where do you see emerging opportunities from the situation start with
Speaker 3chris there again yeah i think as exporters from the region get these new routes to market the kevin's report has talked about we'd be looking for them to leverage not just a return to previous product flows but also to take this as an opportunity to start building out manufacturing more broadly leveraging that strength in petrochemicals and plastics into a wider
Speaker 2manufacturing boom all right jamil where do you see opportunities emerging
Speaker 4from an economic point of view what i'll say is that resilience enabled diversification is the key driver going forward it helps shift investment towards projects that improve or at least maintain wartime productivity while striving to read striving to reduce uncertainty rather than only projects that rely on stable external demand assumptions
Speaker 5right and kevin from a country risk side sure so from a country risk side i think an opportunity lies in the reinforcement of predictability so businesses and investors need clarity on how unblocked quote-unquote or alternative bypass passage is going to be governed or regulated in practice meaning for instance that there won't be legal disputes arising between countries and these these businesses and investors also need confidence that project announcements will move or have a chance to be implemented in the future so i think that's a good point and i think that's a good point i think that's a good point and i think that's a good point and i think that's a good point moved in the into the execution phase without that resident spending can still happen but private sector participation and longer longer term or longer horizon investment will slow down because of remaining uncertainty over the risk adjusted returns thank you for listening to the
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