The Gulf Cooperation Council countries quietly settling accounts: Sovereign wealth funds' trillions of dollars in global investments may face a reshuffle

Ask AI · How Could the U.S.-Israel-Iran Conflict Affect the Investment Strategies of Gulf Sovereign Wealth Funds?

Caixin Global, March 31 (Editor Liu Jingyi) According to disclosures recently made by senior officials in the Gulf region, given the potential impact of the U.S.-Israel-Iran conflict, three Gulf countries are already reassessing how they deploy tens of trillions of dollars in investments within their sovereign wealth funds.

The official said that, as the situation has not shown signs of improvement, three of the four major economic powers within the Gulf Cooperation Council (GCC) are evaluating current and future investment and sponsorship projects. These assessments include the possible withdrawal of investment commitments, divestment, and re-negotiation of global sponsorship agreements.

Saudi Arabia, the UAE, Qatar, and Kuwait are the four major economic powers within the GCC. The GCC also has two other member states, Bahrain and Oman.

The official noted that these countries’ reviews of their sovereign wealth fund investment strategies have already begun. This round of reassessment covers global assets, not just assets in the United States—one of the largest destinations for capital flows.

However, the UAE said its investment plans will remain unchanged. In a statement, the UAE Ministry of Foreign Affairs said the UAE has adopted a forward-looking economic strategy to enhance its ability to respond to relevant geopolitical crises and economic shocks. In this regard, there are no changes to the investment plan or long-term economic priorities.

Non-oil industries will be hit

A JPMorgan analyst last week lowered forecasts for GCC economies’ non-oil industry growth by 1.2 percentage points. The cut for the UAE was as much as 2.3 percentage points, the largest decline in the region.

The JPMorgan analyst warned that although oil-related industries may recover later this year depending on how long the conflict lasts, some of the damage in the non-oil sector will persist and may affect the region’s economic diversification plans.

Gulf countries have long been committed to achieving economic diversification, but oil and natural gas revenues remain the main pillar of public finances, and there are significant differences in fiscal strength among countries in the region.

Sovereign funds such as the Abu Dhabi Investment Authority (ADIA) and Mubadala in the UAE, Saudi Arabia’s Public Investment Fund (PIF), Kuwait Investment Authority (KIA), and Qatar Investment Authority (QIA) are all among the world’s largest sovereign wealth funds.

In addition to investment arrangements involving the United States, Gulf investors are also assessing and estimating whether this regional conflict will slow down or reshape a range of global investment commitments and sponsorship agreements. The overseas investment commitments and sponsorship scales of these Gulf countries are extremely large.

For example, last year the UAE agreed to invest as much as $50 billion in Canada, while Qatari Diar—backed by the Qatar Investment Authority (QIA)—signed a $30 billion coastal development project in an undeveloped area along the Mediterranean coast of Egypt.

Meanwhile, Qatar Airways has pledged to sponsor Formula 1 racing through 2027; Mubadala is a major title partner for multiple ATP and WTA tennis events; and PIF has become an official partner for this year’s FIFA World Cup.

Although analysts expect that these investments and sponsorships are unlikely to be immediately unwound, in the future, the speed and direction of new capital deployments may change.

(Caixin Global, Liu Jingyi)