On 5 June 2017 four states severed relations with Qatar, and the IMF recorded that some banks in the region curtailed transactions with clients linked to Qatar. Within weeks several British banks stopped dealing in riyal banknotes. The official parity never moved, and an index provider consulted on whether to stop converting at that peg.
A peg is a promise about a price. It is not a promise that anyone can reach the counter where the price is offered. Qatar's currency spent four years demonstrating the difference: the parity never moved, and the riyal still became difficult to buy or sell outside the country.
Key Takeaways
- Four states severed relations with Qatar on 5 June 2017; the measures included banks in the region curtailing transactions.
- Several British banks stopped dealing in riyal banknotes within weeks.
- The official parity did not change at any point, before, during or after.
- An index provider consulted publicly on whether to stop converting the currency at its own peg.
- A UK tribunal found in 2026 that a plan to break the peg had been devised, and never carried out.
What was cut, and what was not
Diplomatic relations, transport links, and quietly, some banking.
The International Court of Justice had to establish the facts to decide a jurisdictional appeal, and its 2020 judgment records that on 5 June 2017 the governments of Bahrain, Egypt, Saudi Arabia and the United Arab Emirates severed diplomatic relations with Qatar and adopted restrictive measures, including a prohibition on Qatar-registered aircraft using their airspace.
The monetary limb is easy to miss because it was never announced as policy. The IMF's 2018 report puts it in a single clause: those states severed ties, imposed trade measures and closed their airspace, and some banks in the region also curtailed transactions with clients linked to Qatar.
That last clause is the whole subject, and nothing in it concerns the exchange rate.
Where it showed up first
At the counter of a foreign exchange desk, thousands of kilometres away.
Reuters reported on 30 June 2017 that several British banks had stopped dealing in Qatari riyals, and that offshore trade had become increasingly volatile and illiquid. The detail is specific: Lloyds Banking Group's third-party supplier ceased trading the riyal from 21 June, with neither sale nor buy-back; Barclays stopped supplying it to retail customers while continuing for corporate clients; Royal Bank of Scotland stopped for retail customers; Tesco Bank halted dealings; Travelex suspended and then resumed. HSBC continued to supply riyals to high street customers.
None of those decisions was taken by a party to the dispute. They were taken by banks in a third country responding to a currency that had become awkward to hold and move.
The Qatar Central Bank answered directly. In a statement at the end of June 2017 it said the exchangeability of the riyal inside and outside Qatar was guaranteed at any time at the official price, that it would guarantee all exchange transactions without delay, and that reports to the contrary were baseless.
Both things were true at once. The central bank would deal at the official rate, and a customer in London could not get to it.
The funding side moved with it. The IMF records non-resident deposits, interbank placements and resident private sector deposits falling by about 40 billion US dollars, equal to 11 per cent of total banking system liabilities, offset by central bank liquidity and public sector deposits.
The peg held and the offshore price did not
The distinction is visible in what the Fund chose to chart.
The IMF describes Qatar's arrangement as a conventional peg against the US dollar, in place since July 2001 after an unofficial peg from June 1980. That formulation appears unchanged in its report taken as at February 2018, in the middle of the episode, and in the one taken as at November 2024, years after it. Both describe the same arrangement in the same words.
Its 2018 report nevertheless has a box on the rift, observing that stock market and offshore exchange rates have recovered. The accompanying chart plots the riyal's twelve-month forward rate, with a vertical line at 5 June 2017. The forward, not the spot. The peg was being held where it is held, and the strain appeared where it is not defended.
The central bank said as much afterwards. Its financial stability review for 2017, reported the following year, recorded that the riyal had been subject to a speculative attack in the offshore market since the embargo, that the peg had always been highly credible, and that confidence had been regained with the offshore market rate returning to normal from December 2017.
The clearest evidence is a consultation nobody had to run
An index provider had to decide which of two prices for one currency was the real one.
MSCI opened a consultation on 21 November 2017 on whether to use offshore rates for the riyal in its indexes rather than local rates. That question only arises where the two have separated enough to matter for a global investor converting a portfolio.
On 5 December 2017 it decided not to switch. Its stated reasons were that the spread had substantially narrowed since the consultation opened, that some participants reported improved accessibility of the local market, and that on 28 November the Qatar Stock Exchange had announced the central bank's confirmed willingness to guarantee all investors trading on the exchange their riyals at a rate equivalent to the official onshore rates.
The voting is the part worth keeping. Ninety per cent of the feedback received before that announcement favoured switching to offshore rates. After it, more than half of participants revised their position and asked MSCI to wait. What changed their minds was not a movement in the peg, which had not moved, but a public undertaking about access to it.
MSCI reserved the right to switch without further consultation should the spread widen materially and persistently.
What a court found later
That the currency had been a target, and the record is recent.
The Financial Conduct Authority published decision notices in May 2023 finding that between September and November 2017 a bank had acted without integrity by creating and disseminating a document containing manipulative trading strategies aimed at creating a false or misleading impression as to the market in, or the price of, Qatari bonds. The stated objective, in the regulator's words, was to devalue the Qatari riyal and break its peg to the US dollar. The strategy was never implemented.
On 3 February 2026 the Upper Tribunal upheld liability against the firm and two individuals, finding they had a plan to seriously damage the Qatari economy, while reducing the firm's penalty. The individuals retain permanent bans.
That corroborates, from a regulator and a tribunal, what the Fund noted in 2018 as an investigation into possible exchange and bond market manipulation.
What has been rebuilt, and what cannot be confirmed
The dispute ended formally at the 41st session of the Gulf Cooperation Council's Supreme Council, at Al-Ula on 5 January 2021. One thing can then be said with dated evidence. The rift has disappeared from the Fund's surveillance: its 2018 and 2019 reports foreground it, its 2022 and 2025 reports do not mention it at all. An episode that dominated two consultations is absent from the two that follow.
One thing cannot. No institution has stated on the record that the banknote channel or the correspondent relationships have been restored to what they were before June 2017. The absence of the subject from official reporting is consistent with normalisation, and is not a statement of it.
The general point
A currency arrangement has two halves, and only one of them is a number.
The published parity is the half that gets discussed, defended and occasionally abandoned. The other half is the set of arrangements through which somebody outside the country reaches it: correspondent banks willing to clear, institutions willing to hold notes, a route for physical currency to come home. That half has no published level, so nothing about it appears to change until it stops working. The 2017 episode is useful precisely because the peg was never in doubt. It isolates the other half.
Where to look next
The AUD to QAR page carries the live reference rate and a short block on what Qatar's central bank actually manages. For a peg defended by an open standing offer rather than by discretion, how a currency board defends a peg sets that out. Where onshore and offshore markets are separated by design rather than by a dispute, why some currencies have no offshore market covers what fills the gap. A currency peg is the arrangement whose price half held throughout this episode.
Sources
- International Court of Justice, Judgment of 14 July 2020 - the severing of relations on 5 June 2017 and the restrictive measures adopted
- IMF, Qatar 2018 Article IV Consultation, Country Report No. 18/135 - banks in the region curtailing transactions with clients linked to Qatar; Box 1 on the rift, the recovery of offshore rates, the twelve-month forward chart and the investigation into possible market manipulation; and the exchange rate arrangement as at February 2018
- IMF, Qatar 2024 Article IV Consultation, Country Report No. 25/47 - the unchanged description of the arrangement as at 30 November 2024
- MSCI, MSCI to continue using the local FX rates for the Qatari Riyal until further notice, 5 December 2017 - the consultation of 21 November, the Qatar Stock Exchange announcement of 28 November, the 90 per cent initial feedback and its later revision, and the reserved right to switch
- Financial Conduct Authority, decision notices concerning Banque Havilland SA, May 2023 - the document created between September and November 2017, its stated objective, and that it was never implemented
- Financial Conduct Authority, Upper Tribunal finds that Banque Havilland devised a plan to harm the Qatari economy, 3 February 2026 - liability upheld, the penalty reduced, the bans retained
- Reuters, several UK banks stop selling Qatar riyals, 30 June 2017, as carried by Al Jazeera - the named banks, and offshore trade described as increasingly volatile and illiquid
- Qatar Tribune, exchange rate stability of riyal intact, says QCB, 4 July 2017 - the central bank's statement on exchangeability, as reported; its own site was unreachable
- Gulf Times, on the Qatar Central Bank financial stability review for 2017, 28 June 2018 - the speculative attack in the offshore market, and the return to normal from December 2017
- Gulf Cooperation Council, 41st session of the Supreme Council, Al-Ula, 5 January 2021 - the date and instrument of the reconciliation
General information about currency pegs and payment infrastructure. Not financial advice, and not a recommendation of any product or institution. Nothing here states or implies the value of any currency. Reviewed by the Tradergy editorial team, September 2026.
Common questions
Did the Qatari riyal peg break during the blockade?
No. The IMF describes the arrangement, both in law and in practice, as a conventional peg against the US dollar, in place since July 2001 after an unofficial peg from June 1980. The same description appears unchanged in its reports taken as at February 2018, during the episode, and as at November 2024, years afterwards.
What actually stopped working?
Access. The IMF recorded that some banks in the region curtailed transactions with clients linked to Qatar. Reuters reported at the end of June 2017 that several British banks had stopped dealing in riyals, naming Lloyds Banking Group, Barclays for retail customers, Royal Bank of Scotland for retail customers and Tesco Bank, while HSBC continued to supply the currency.
Why would an offshore price differ from a peg?
Because a peg is defended at a counter inside the country. If the channels that connect the outside world to that counter are impeded, someone abroad who wants to buy or sell the currency cannot easily reach the rate being defended, and has to deal with whoever will trade at whatever price. The IMF's own chart on the episode plots the riyal's twelve-month forward rate rather than the spot rate.
What did MSCI do about it?
It ran a public consultation, opened on 21 November 2017, on whether to use offshore rates for the Qatari riyal in its indexes instead of local ones. On 5 December 2017 it decided to keep using local rates, noting the spread had substantially narrowed and that the Qatar Stock Exchange had announced the central bank's willingness to guarantee investors the official onshore rate.
Was anyone found to have targeted the currency?
The Financial Conduct Authority issued decision notices in May 2023 finding that a bank had created and circulated a document containing manipulative trading strategies whose objective was to devalue the riyal and break its peg. The strategy was never implemented. In February 2026 the Upper Tribunal upheld liability, while reducing the firm's penalty.