Unfazed by the US-Iran conflict and fiscal pressure! Gulf countries plan to withdraw overseas investments, will the US be hit first?

As the United States and Israel launch military actions against Iran, the Middle East situation continues to escalate. The conflict is not only changing regional security dynamics but also beginning to impact global capital flows. The Financial Times (FT) reports that major Gulf countries such as Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar are considering withdrawing existing and future overseas investment commitments in response to the financial pressures caused by the war. This move not only reflects increased regional economic risks but also hints at potential dissatisfaction with U.S. strategic decisions.

Gulf Sovereign Funds Initiate Investment Review Amid War-Related Fiscal Pressures

The FT quotes an anonymous Gulf official stating that the four major Gulf economies—Saudi Arabia, the UAE, Kuwait, and Qatar—are jointly discussing the financial and economic pressures from the war and have begun reviewing their overseas investment commitments.

Some government agencies have started exploring whether they can invoke force majeure clauses in existing contracts to reassess foreign investments, including corporate partnerships, sports sponsorships, and asset holdings, to alleviate the fiscal burden of the conflict.

If war-related expenditures continue at current levels, these reviews could further influence Gulf countries’ investment plans in the U.S. and other Western markets.

Declining Revenues and Increased Defense Spending Put Gulf Economies Under Double Pressure

The report indicates that this review is a preventive measure driven by multiple economic impacts of the war.

On one hand, energy transportation and exports are affected by the conflict, with shipping activities significantly reduced. The Strait of Hormuz, a critical route for about one-fifth of global oil and natural gas shipments, is also experiencing security concerns. On the other hand, Iran’s attacks on U.S. military and diplomatic facilities in the Middle East have disrupted airport, tourism, and airline activities, while simultaneously increasing defense expenditures across various countries.

With revenues declining and expenditures rising, Gulf nations are re-evaluating their foreign investments and fiscal strategies.

Middle Eastern Allies Express Discontent with U.S. Decisions: “We Don’t Want to Be Drawn Into War”

The article also notes that Gulf countries previously urged U.S. President Trump to avoid attacking Iran and sought diplomatic solutions to resolve the conflict. However, they now have to endure Iran’s retaliations against U.S. allies.

Khalaf al-Habtoor, a prominent Emirati billionaire and businessman, recently publicly questioned on social platform X whether the U.S. has fully assessed the regional risks of the war: “Who gave you the authority to drag our region into a war with Iran? Did you consider how much damage this would cause before pulling the trigger?”

Most of the funds supporting regional stability and development—amounting to billions of dollars—come from Gulf countries, including us. Today, these nations have the right to ask: “Where did this money go? Are we funding peace initiatives or a war that puts us in danger?”

Shifts in Global Capital Flows Challenge U.S. Asset Attractiveness

The article does not specify which countries might withdraw investments, but global capital flows have already begun to change. According to the financial media Kobeissi Letter, citing Bank of America research, investors are diversifying away from U.S. stocks. By 2026, only 26 out of every 100 dollars flowing into global equity funds are expected to go into U.S. stocks, the lowest proportion since 2020.

Some funds are moving toward Japan, South Korea, Europe, and emerging markets, indicating that global investors are reassessing asset allocations and diversifying outside the U.S. Once Gulf sovereign funds further reduce their commitments to U.S. and other markets, it could introduce new uncertainties into the global financial markets.

This article, “Unable to withstand U.S.-Iran war fiscal pressures! Gulf countries plan to withdraw overseas investments, with the U.S bearing the brunt?” first appeared on Chain News ABMedia.