Fitch downgrades Saudi credit rating over military tensions

The September 17 missile and drone attacks on the key Saudi oil processing plant in Abqaiq and the nearby Khurais oil field cut the kingdom's output by half and rattled world energy markets (AFP Photo/Fayez Nureldine)

Dubai (AFP) - Fitch Ratings on Monday downgraded Saudi Arabia's credit rating by one notch, citing "rising geopolitical and military tensions in the Gulf region" after unprecedented attacks on the kingdom's oil industry.

Drone and missile attacks on two key facilities, including the world's largest oil processing plant at Abqaiq on September 14, knocked out half of Saudi production.

"Although oil production was restored fully by end-September, we believe that there is a risk of further attacks on Saudi Arabia, which could result in economic damage," Fitch said.

"We have revised our assessment of the vulnerability of Saudi Arabia's economic infrastructure to regional military threats as a result of the most recent attack."

The agency said in a statement it had lowered Saudi Arabia's long-term foreign currency issuer rating from A+ to A, with a stable outlook.

Fitch said it has also revised its assessment of the continued deterioration in Riyadh's fiscal and external balance sheets and its vulnerability to regional military threats following the attacks.

Yemen's Iran-backed Huthi rebels claimed responsibility for the devastating strikes but the United States and Saudi Arabia have both put the blame on Tehran.

The Huthis have carried out dozens of drone and missile attacks on Saudi targets, including oil facilities.

"In our view, Saudi Arabia is vulnerable to escalating geopolitical tensions given its prominent foreign policy stance, including its close alignment with US policy on Iran and its continued involvement in the Yemen war," Fitch said.

"We see a risk that the US and Saudi Arabia could be drawn into a deeper conflict with Iran," it added.