To sustain global influence, Gulf economies recalibrate foreign investments as war drains revenues

As war drains revenues, Gulf economies are reevaluating their foreign investments to maintain global influence and political weight, according to experts. The US-Israeli conflict with Iran has caused a sharp decline in foreign investment, with the region experiencing a 67 percent drop since the war began in February. This has put strain on the Gulf states' ability to invest abroad, as seen in Kuwait's recent borrowing from its sovereign wealth fund to support public finances and Saudi Arabia's plans to borrow up to $8 billion to diversify income sources.

The closure of the Strait of Hormuz has forced GCC states to balance domestic infrastructure development and overseas economic ambitions, as well as competing priorities between domestic spending and outbound investments. Infrastructure projects, such as pipelines bypassing the Hormuz chokepoint, are expensive and geographically complicated but are being pursued to provide backup options.

While Saudi Arabia has continued previous strategic recalibrations, the UAE is seeking to restore normalcy and Qatar is addressing growing economic pressures due to its significant exposure to Hormuz. Despite diversification efforts, the war has pushed some economic diversification agenda items lower on the priority list as sectors targeted by diversification, such as tourism and heavy manufacturing, have been disrupted.