One strait, one weakness

People taking photos during a light and water show at the Place Vendome Mall in Lusail, Qatar. — Erin Schaff/The New York Times

IN Qatar, a desert peninsula protruding into the Persian Gulf, natural gas turned a pearl-diving backwater into one of the world’s wealthiest nations.

For three decades, Qatar built supply lines, shipping tens of billions of dollars of liquefied natural gas each year through the Strait of Hormuz.

The state, which derives more than 60% of its revenue from gas exports, used that money to transform the peninsula into a gleaming metropolis.

Unpaved desert roads became mono­lithic skyscrapers. Gas wealth funded a metro system, the world’s most expensive World Cup, and a US$600bil sovereign wealth fund with stakes from Heathrow Airport to the Empire State Building.

Then, in February, Qatar’s door to the world slammed shut.

The closure of the Strait of Hormuz meant virtually no gas had left Qatar’s shore for more than three months.

The nation was also cut off from sea routes for imports.

Ras Laffan, Qatar’s industrial centre for gas production, was shuttered.

In the vast port north of Doha, loading cranes stood paralysed. Hotels and boutiques sat in noticeable silence.

For Qatar, gas shipments “are nothing short of foundational”, Ahmed Helal, a managing director at the Asia Group, said in an interview in Doha.

“Nothing you see here would have been possible without the wealth of energy. That is why Qatar is quickly falling into a very challenging fiscal situation.”

Qatar’s economic transformation began in the 1990s, betting on supercooling gas from the North Field – the world’s largest natural gas reservoir – to -162°C, turning it into liquid for global shipment.

Its first shipment to Japan in 1996 kicked off an energy superpower’s rise. By 2010, production hit 77 million tonnes.

For most of the next decade, Qatar was the wealthiest country per capita.

From the 1990s to the 2010s, the economy boomed at an average annual rate of roughly 13%.

To power this build-out, Qatar relied on foreign workers; today, about 90% of its 3.2 million residents are non-citizens.

Seeking momentum, Qatar said in 2019 it would expand LNG production to 126 million tonnes a year by 2027.

Then, in late February, much of that activity ground to a halt.

Unlike its neighbours Saudi Arabia and the UAE, which have pipelines bypassing the Strait of Hormuz, Qatar is geographically trapped.

Within 24 hours of the Iranian blockade, QatarEnergy announced it couldn’t fulfil its contracts.

Two weeks later, Iranian missiles and drones struck Qatar’s Ras Laffan plant, damaging critical equipment and causing a 17% reduction in production capacity.

The damage means that even with the opened, it would take years to return to pre-war output.

Analysts estimate that QatarEnergy had lost billions, and every day the strait remained closed, the country bled hundreds of millions more.

The International Monetary Fund expects Qatar’s economy to shrink 8.6% this year.

For countries like Qatar, the closure of the strait darkened the outlook, said Pierre-Olivier Gourinchas, chief economist at the IMF.

The war had also exposed another ­vulnerability.

Qatar has tried to diversify beyond fossil fuels into tourism and business.

Before the war, scarcely a month went by without a major international sporting event. Since the war, however, inter­national visitors have plummeted amid ­travel advisories.

Many multinational companies, fearing regional instability, have sent staff out of the country.

In March, the World Travel & Tourism Council estimated the Middle East was ­losing US$600mil a day in tourism revenue.

The Qatari government has worked to project stability while shielding its popu­lation.

Because Qatar imports about 90% of its food, the maritime impasse forced a major reworking of supply chains.

Fresh produce and grain once arrived by sea; they were diverted to costly airfreight or trucked through Saudi Arabia.

However, prices for imported goods have risen only about 5% to 10%, accor­ding to supermarket workers, thanks to aggressive government subsidies.

Economists forecast that even if LNG revenue vanished for years, Qatar’s deep pockets would allow it to continue paying salaries.

S&P Global Ratings noted Qatar’s ­“sizable accumulated fiscal and external assets”. At the same time, authorities have pressured international firms to return to prevent an exodus of foreign capital and talent.

The concern, said Helal, is that if companies collapse, the country’s overwhelmingly foreign workforce could quickly disappear.

“If there’s a migration out, then that starts to get quite scary,” he added.

So far, Qatari authorities have “done a good job of projecting calm and managing the fallout,” he said.

“But is there a big fiscal gap hole that’s forming? Of course,” he added.

“It really depends on the duration of the strait remaining closed.” — ©2026 The New York Times Company

This article originally appeared in The New York Times