Gulf sovereign wealth funds—managed by Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and others—control roughly $5 trillion in assets and have been major players in global investment. Their capital has flowed into strategic stakes in multinational firms, entertainment deals, large-scale regional reconstruction and development projects, and food-security and energy-transition initiatives across Africa. Governments in the region have also used overseas aid as a form of geopolitical influence, helping stabilize countries such as Egypt and supporting reconstruction and relief efforts in Syria, Lebanon and Gaza.
That investment posture faces new uncertainty because of the war involving Iran, which intensified after US and Israeli strikes in late February and has since disrupted regional oil and shipping activity. Gulf producers have cut oil and gas output and shipping, while attacks on oil infrastructure, airports and US military facilities, together with interruptions in the Strait of Hormuz, have heightened security concerns across the region.
Analysts have trimmed growth forecasts. Oxford Economics estimated in mid-March that national income across the Gulf will expand by about 2.6% this year—around 1.8 percentage points below earlier expectations. The impact will vary by country: Oman and Saudi Arabia have alternative export routes and could benefit from higher oil prices, whereas Bahrain, Kuwait and Qatar face tighter constraints.
The conflict also undermines diversification efforts. Tourism, real estate and the digital economy have been hurt, local stock markets have weakened, and images of strikes have damaged the Gulf’s long-promoted reputation for safety. Tourism consultants warn that airspace closures during peak periods such as Ramadan could reduce visitor spending by as much as $56 billion.
How sovereign funds and Gulf investment strategies will adjust is still unclear. In the short term the effects are mostly negative, but many funds remain well-capitalized and may proceed with planned overseas commitments. A prolonged conflict or mounting domestic fiscal pressure, however, could force a rethink.
Policy priorities may shift toward resilience and domestic protection: building strategic food reserves, financing alternative export pipelines, reconstruction, and boosting defense spending are all possible outcomes. Sovereign funds could be redeployed to shore up at-risk local sectors—keeping hotels or other businesses solvent during downturns—rather than financing overseas deals.
There are also reports that several Gulf states are reviewing proposed US investments because of war-related strains. Observers note some earlier pledges were symbolic, while others align with broader strategic objectives and could continue despite higher defense spending.
Near-term growth is likely to slow and the region will be seen as riskier, which could damp capital flows. The depth and duration of any pullback will depend on how the conflict evolves: a persistent security threat could permanently alter Gulf overseas investment, whereas a return to stability would allow many plans to resume.