Government departments face budget reductions of up to 30%, while overseas aid funding has also been sharply reduced

Qatar has cut government spending as the economic impact of the ongoing US-Iran conflict and disruption to the Strait of Hormuz weighs heavily on its liquefied natural gas revenues.

Government departments have reportedly faced budget reductions of up to 30%, while funding for overseas aid has been cut by about 85%, according to people briefed on the matter.

Qatar has been particularly affected because it has halted LNG production following damage linked to the conflict and difficulties shipping gas through the Strait of Hormuz, a key route for its energy exports.

The reductions come as Qatar faces a sharp economic contraction. The International Monetary Fund has forecast that the country’s economy will shrink by 8.6% this year, the largest contraction among the six Gulf states.

Qatar has substantial financial reserves, including the Qatar Investment Authority, which manages around $500 billion in assets. However, officials and economists have warned that prolonged disruption could put further pressure on government finances and lead to additional spending cuts.

The conflict has affected Gulf economies more broadly, disrupting energy exports, trade, tourism, and other economic activity. Qatar and Kuwait are particularly exposed to the Strait of Hormuz because of their reliance on the waterway for energy shipments.

Despite the economic pressures, a Qatari official said the country remained capable of managing the crisis and maintaining its long-term economic plans, citing its experience in dealing with previous regional and global crises.