Three Gulf states are reviewing how they deploy trillions of dollars invested by their sovereign wealth funds in anticipation of offsetting the losses triggered by the U.S.-Israeli war on Iran, a Gulf official told Reuters.
These reviews include possible investment pledge reversals, divestments and a re-evaluation of global sponsorship deals as the oil-and-gas-rich states assess how to absorb the financial shock, said the official, who requested anonymity due to the sensitivity of the matter and without identifying which states.
Saudi Arabia, the United Arab Emirates (UAE), Qatar and Kuwait are the top economies in the Gulf Cooperation Council.
“Three of the big four economies in the GCC are all assessing future and current investments and sponsorships if this lasts long,” they said.
“A review of their sovereign wealth fund investment strategies has already started,” the official added.
Talks were held between high-level representatives of governments, not among the funds themselves, and the assessments are not coordinated, the official added.
In just 12 days, the conflict has delivered a severe economic blow to the Gulf’s largest economies, crippling aviation, tourism, ports and logistics networks, while also severing key commercial arteries.
$5 TRILLION IN WEALTH
The UAE said it was sticking to its investment plans.
The UAE has adopted forward-looking economic strategies that enhance its capacity to absorb any geopolitical and economic pressures,” the UAE’s Ministry of Foreign Affairs told Reuters in a statement. “In this regard, there is no change to investment plans or long-term economic priorities.”
Meanwhile, a Saudi source told Reuters that the kingdom’s Public Investment Fund is instrumental to its economic transformation agenda and is not expected to revise long-term investment plans due to the current geopolitical landscape.
Saudi Arabia’s finance ministry was not immediately available for comment.
Qatar’s Finance Ministry did not respond to a Reuters request for comment. Reuters was unable to get a comment from Kuwait’s Ministry of Economic Affairs and Investment.
Analysts have said a fiscal shock may lead to a rethink of how the $5 trillion accumulated in the region’s sovereign wealth funds is deployed, but the official’s comments show this review process is already underway.
“Once the war is over, we will see the balance sheet and then figure out how to cover the losses,” the official said.
JPMorgan analysts last week cut their growth forecasts for non-oil sectors by 1.2 percentage points for GCC economies and a 2.3-point revision for the UAE, the steepest in the bloc.
The JPMorgan analysts warned that while the hydrocarbon sector could recover later in the year depending on how long the conflict lasts, some damage to non-hydrocarbon activity would persist and could impact the region’s diversification plans.
WIDE REACH AND BIG COMMITMENTS
Gulf states have sought to diversify their economies, but oil and gas revenues still anchor public finances, which vary widely in strength across the region.
Sovereign funds such as the UAE’s ADIA and Mubadala, Saudi Arabia’s PIF, Kuwait’s KIA and Qatar’s QIA rank among the world’s largest, holding assets built up over decades of investing at home and abroad.
The reassessment covers global holdings, not only U.S. assets — already one of the biggest destinations for Gulf sovereign money, where governments have pledged trillions of future investment since President Donald Trump returned to the White House last year, the official said.
Beyond the U.S. pledge, Gulf sovereign investors are weighing whether the conflict could slow or reshape a wide range of global investment commitments and sponsorship deals.
The scale of overseas pledges and sponsorship is vast.
Last year, for example, the UAE agreed to invest up to $50 billion in Canada, while QIA-backed Qatari Diar signed a $30 billion landmark coastal development on an untouched stretch of Egypt’s Mediterranean coastline.
Meanwhile, Qatar Airways has committed to sponsoring Formula 1 motorsports through 2027, Mubadala is a major title partner across multiple ATP and WTA tennis events and PIF has become an official partner of this year’s FIFA World Cup.
SLOWING NEW COMMITMENTS
While analysts predict these positions are unlikely to be unwound immediately, the said that the pace and direction of new capital deployments could shift.
“The first reaction is not to sell down global assets. Before unwinding anything overseas, they will assess the potential impact and whether there is value add in redirecting that capital locally,” said Jahangir Aka, founder of London-based Aka & Associates.
“For now, the Gulf’s global investments are arguably providing resilience as a diversifier, and you would not necessarily expect significant trimming as those assets continue to generate income for governments back home,” Aka added.
“What you may see instead is a slowing in the pace of new commitments and defer sending money overseas until there is greater clarity on any structural impact of the current conflict,” Aka said.
(Reuters)