Why Oman is benefiting from the war: Ex-IMF official Tim Callen explains

Oman’s strategic location outside the Strait of Hormuz, its ability to continue exporting oil and years of economic reforms are helping the country navigate the economic fallout of the ongoing Gulf crisis, according to Tim Callen, former Assistant Director at the International Monetary Fund (IMF) and Visiting Fellow at the Arab Gulf States Institute.

In an exclusive interview with Firstpost, Callen said geography is the biggest factor behind Oman’s relatively favourable economic outlook, allowing it to benefit from elevated oil prices while other Gulf economies face disruptions to energy exports and trade routes.

According to recent IMF projections discussed in the interview, Oman is expected to record positive economic growth while other Gulf countries face contraction, highlighting how access to alternative export routes can shape the economic impact of a regional conflict.

“Oman is in the most advantageous geographical position among the Gulf countries,” Callen said.

How Oman’s geography is providing an advantage

The Strait of Hormuz is a critical energy shipping route connecting the Persian Gulf with international markets. Disruptions to shipping through the strait can affect oil exports from several Gulf producers, limiting their ability to capitalise on higher crude prices.

Oman, however, has a geographical advantage because it has coastline along the Arabian Sea and access to ports outside the Strait of Hormuz. This gives the country alternative routes for moving energy supplies to global markets.

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Callen said Oman has been able to increase its oil production somewhat and benefit from higher prices, supporting its economic performance amid the crisis.

“High oil prices are of little use if you struggle to export your oil, but if you can export it, it is good business,” he said.

The distinction is significant for oil-producing economies. While higher crude prices can increase potential export earnings, the actual economic benefit depends on whether producers can maintain output and transport supplies to buyers.

Economic reforms have strengthened Oman’s position

Callen stressed that Oman’s relative resilience cannot be attributed to geography alone. The country has also made significant progress on economic reforms over the past five years, addressing fiscal and government budget problems that previously weighed on its outlook.

Oman had faced concerns over its relatively high debt and larger fiscal deficit compared with other Gulf Cooperation Council (GCC) economies. According to Callen, improvements in public finances have helped the country move closer to its regional peers and strengthen investor confidence.

“Oman has done an excellent job of implementing important reforms that have stabilised its economy and strengthened investor confidence,” he said.

He added that investor confidence in the Omani economy was considerably weaker five to ten years ago. Reforms aimed at improving fiscal stability and attracting investment have since helped change that perception.

The improvement in public finances has also given Oman a stronger foundation to navigate external shocks, even as geopolitical tensions threaten trade, energy supplies and economic activity across the region.

Why higher oil prices do not benefit every Gulf country equally

The crisis has exposed an important difference between oil-producing countries: the ability to export energy can matter as much as the price of oil itself.

For producers whose shipments are disrupted, elevated crude prices may not translate into higher export revenues if they cannot deliver supplies to international markets. Countries with access to alternative routes may be better placed to benefit from the price increase.

Oman’s location, continued oil exports and improved fiscal position have therefore provided a combination of advantages at a time of heightened regional uncertainty.

However, its favourable outlook does not mean the country is insulated from the wider consequences of the conflict. Prolonged instability could still affect regional trade, investor sentiment and economic activity.

For now, Callen’s assessment points to two factors shaping Oman’s relative resilience: geography has provided the immediate advantage, while economic reforms have strengthened the foundations of its economy.

Together, these developments help explain why Oman could continue to grow even as other Gulf economies face mounting economic pressure from the crisis.