The sums invested worldwide by oil-rich Gulf states are enormous. Sovereign wealth funds from Saudi Arabia, the United Arab Emirates, Qatar, Kuwait and others manage roughly $5 trillion in assets. Their money has flowed into everything from strategic stakes in global companies to large-scale regional aid and development projects.
Gulf investments have ranged from backing major corporate deals to multibillion-dollar regional reconstruction and stabilization efforts. In recent years Gulf funds backed bids in the US entertainment sector, and last year Gulf leaders pledged multitrillion-dollar investments during a US presidential visit. Over the last decade Gulf states have also spent about $100 billion in Africa on food-security, mineral access and energy-transition projects. Experts describe some of the region’s overseas assistance as “bailout diplomacy,” including efforts to stabilize Egypt and finance reconstruction and aid in Syria, Lebanon and Gaza.
But the Iran war has the potential to change those investment dynamics. The conflict, which escalated after US and Israeli strikes on Iran in late February, has prompted Gulf states to cut oil and gas production and shipping. Iran has targeted oil infrastructure, airports and US military bases across the region and has disrupted the Strait of Hormuz — a vital hydrocarbon shipping route. Those developments have raised security concerns across the Gulf.
Economic forecasts have been adjusted downward. Oxford Economics said in mid-March that Gulf states’ national income will grow by only about 2.6% this year, roughly 1.8 percentage points below earlier forecasts. The hit won’t be uniform: Oman and Saudi Arabia have alternative export routes and may even benefit from higher oil prices, while Bahrain, Kuwait and Qatar face greater constraints.
The war has also set back diversification efforts. Tourism, real estate and the digital sector have been affected, and local stock markets have fallen. Observers note that images and videos of strikes in Gulf cities have punctured the region’s carefully cultivated image of security. Tourism experts warn that airspace closures, particularly during holidays like Ramadan, could cut visitor spending by as much as $56 billion.
How Gulf investment strategies will change remains uncertain. Analysts say short-term effects are clearly negative, but longer-term consequences depend on the conflict’s duration and its aftermath. Most sovereign wealth funds remain financially robust now, suggesting initial overseas investment plans may hold. However, a prolonged conflict or deeper domestic economic strains could prompt adjustments.
Targets and priorities could shift. Some governments may boost spending on resilience and security: strategic food reserves, alternative export pipelines, reconstruction, and higher defense budgets have all been suggested as likely post-conflict priorities. Gulf officials themselves acknowledge the need to rebuild and strengthen defenses, and sovereign funds could be tapped to support domestic sectors — for example, helping keep hotels or other at-risk businesses afloat during downturns.
There is also debate over whether previously announced foreign commitments will be scaled back. Reports say three major Gulf states are reviewing proposed US investments because of war-related financial strains. Still, analysts note many pledges were partly symbolic, and for countries planning higher defense procurement, continued investment in partner economies could remain consistent with broader strategic goals.
Near-term growth is likely to be lower and the region will be perceived as riskier, which could dampen investment across the board. The extent and duration of any pullback will hinge on how the war ends: if risks of renewed conflict and disruption persist, Gulf overseas investment could be permanently affected; if stability returns, many investment plans may resume.
