Qatar cuts annual budget following the war. The consequences will be felt worldwide

Gulf states have been hit by Operation "Lion's Roar" and the closure of the Strait of Hormuz, but it is evident that the one that has suffered the most severe economic blow is Qatar, which for years was perceived as the strongest, at least on a diplomatic level.

Following the war, the emirate, whose economy is based on natural gas exports, is forced to reduce its 2026 budget, initially set at about $61 billion, by 30%, and cut the volume of investments outside the country by 85%, according to the Financial Times.

Qatar manages its foreign investments with the help of its local sovereign wealth fund: the Qatar Investment Authority (QIA). A significant part of its activity is not public, but what Doha chooses to publicize includes: in the coming decade, half a trillion dollars in investments were planned in the USA (technology, infrastructure, and energy); $10 billion in India (infrastructure, technology, manufacturing); and a joint fund with Indonesia where each country would provide $2 billion (industry, renewable energy, and healthcare). Additionally, as part of relations with its close ally, Turkey, the countries committed to reaching a bilateral trade volume of $5 billion.

Dramatic budget cut

Each of the GCC (Gulf Cooperation Council) members has suffered, at the very least, a significant slowdown in growth in 2026, following the drop in oil and liquefied natural gas (LNG) export capacity. However, Qatar's case is the most extreme event.

According to the International Monetary Fund, Qatar's GDP is expected to shrink by 8.6% by the end of the year. This is due to Doha's enormous dependence on LNG, with official data indicating it accounted for about 34.7% of GDP last year.

The inability to export natural gas severely damages Qatar's image as a reliable LNG supplier, after it only became the second-largest international exporter in 2025, with 81.5 million tons, surpassing Australia, which exported 80.3 million tons. For comparison, the USA was in first place with 110.7 million tons. This means that these three countries together provided about 63% of the global trade in LNG.

Dr. Yoel Guzansky, head of the Gulf Program at the Institute for National Security Studies (INSS), defines the Qatari budget cut as dramatic and historic, noting that the move may affect Doha's future steps. "The damage to the Qatari economy is severe, especially since the war is not coming to an end and we are in an unclear situation of instability, neither war nor peace," the researcher explains. "Qatar has not been able to export LNG in reasonable quantities since the outbreak of 'Lion's Roar'. If the war does not end soon, and oil and gas exports do not resume quickly, the damage will be more severe."

In the shadow of the ongoing blockade of the Strait of Hormuz, the only entry and exit gate from the Persian Gulf, the International Energy Agency (IEA) estimated last month that demand for natural gas would decrease by half a percent by the end of the year compared to last year. According to the IEA, LNG production in Qatar and the UAE dropped by nearly 80% between March and June compared to the same period last year.

Long-term effects

In the Qatari case, the damage to the pace of LNG production is expected to last for years, even beyond a ceasefire agreement with the Islamic Republic that would open the strait. In March, Iran struck the Ras Laffan complex, where the liquefaction process for export takes place.

Doha explained that the facility, which accounts for about 17% of their natural gas exports, may return to normal only in about five years, and took care to declare the breach of several contracts due to "force majeure." In terms of damages, Doha will lose about $20 billion in revenue annually until the strategic asset is restored.

Dr. Ariel Admoni, a Qatar researcher from Ariel University and the Jerusalem Institute for Strategy and Security, emphasizes that although the damage to Doha is evident from the budget cut, Emir Tamim bin Hamad Al Thani and his people have been acting since the outbreak of the war at the end of February, partly through the declaration of force majeure, to minimize economic damage.

One of the creative methods Doha is using to keep prominent customers in the Far East close was the departure of Finance Minister Ali Al-Kuwari to the US West Coast, with the goal of buying 33 American tankers from the company Venture Global on the much more expensive spot market and sending them to Asia. The main thing is to maintain the image of a reliable supplier. Reuters reported that the tankers' destinations were Japan, South Korea, India, Bangladesh, and Taiwan.

Threat from Saudi Arabia

"The Qataris started acting from the moment they identified the Saudis trying to use the LNG situation to their advantage," explains Dr. Admoni. "We also saw meetings of senior Qatari officials with Algerians to find solutions. It can be assumed that with a media-savvy approach, they are releasing part of the truth in a controlled manner, in an attempt to project reliability, but in practice, the problem is more acute than reported. The damage is severe. How severe? We don't really know."

Farouk Soussa, a Middle East economist at Goldman Sachs, estimated in a conversation with the Financial Times that the loss of energy export revenues for Qatar and Kuwait, two countries located on the western coast of the Persian Gulf, amounts to a rate of about $1.5–2 billion per week. The damage for them is more severe than for their neighbors, the oil and natural gas exporters, because some of them have access outside the Persian Gulf. Saudi Arabia has its western coast with the Red Sea, while the UAE has Fujairah, which is located outside the strait.

"This is a very big setback for the Gulf states, it is very expensive and these are many losses that the governments are forced to bear," Soussa told the Financial Times. "Most of them are rich and capable of absorbing it, but the question that is difficult to answer is whether this will have a long-term effect, and how much it will be a factor in damaging potential or future growth."

From the Israeli perspective, Dr. Yoel Guzansky concludes that Doha's economic damages may affect Qatari mediation efforts, and instead they will turn to new priorities.

According to him, "If it is a significant and long-term damage, Qatar will be required to reduce investments in certain places. We still don't know, especially when mediation and Qatar's involvement are a critical resource for this emirate, and it can be assumed that it will not stop completely. It is possible that the Qataris will reduce certain investments, but will not stop the mediation efforts, which are a cornerstone of Qatari national security."