Amid regional upheavals, Gulf states are asserting their influence and betting on a vast economic transformation.
The Gulf ’s six oil-rich monarchies are typically spared the Middle East’s most violent conflicts. But Iran’s retaliatory strike on a US military base in Qatar in June reawakened existential fears that the polished Gulf citadels could be pulled into open war: a scenario not seen since Saddam Hussein’s 1990 invasion of Kuwait.
For the region’s business community, another concern is now-regular disruption to shipping and trade corridors. Middle Eastern countries were forced to shut down their airspace during the Israeli-US bombardment of Iran and face growing pressure on maritime routes, especially in the Red Sea, around the Suez Canal, and the Straits of Hormuz, where 20% of global oil flows daily.
Yet, despite these geopolitical headwinds, the Gulf economies are thriving. This year again, the Gulf Cooperation Council (GCC) is expected to grow faster than the global average with a projected 3.2% GDP increase, according to the World Bank. Meanwhile, Saudi Arabia, the United Arab Emirates (UAE), Qatar, Bahrain, Oman, and Kuwait continue to pour billions of dollars into diversifying their economies away from oil and gas.
The Washington Connection
The Gulf remains a heavyweight in world affairs, holding around one-third of global crude oil reserves and more than $3.8 trillion in sovereign wealth fund assets. While most economies are struggling with global trade uncertainty, the GCC states have largely been spared the shockwaves from President Trump’s economic policies.
Earlier this year, the White House imposed a 10% tariff on GCC exports, a move that may result in increased costs or supply chain disruptions in sectors like aluminum and petrochemicals. But GCC capitals have directed much of their export focus toward Asia for some years now, and more importantly, oil and gas exports remain exempt from US tariffs.
“Behind the scenes, there is a lot of collaboration, a lot of business happening. ”
Ron Daniel, CEO of Liquidity
Trump’s May visit to Riyadh, Doha, and Abu Dhabi marked an inflection point in this strategic relationship and the start of a new era of deal-making. The US secured at least $3.2 trillion in investment pledges for the coming decade: $1.4 trillion from Qatar, including a $96 billion aircraft order from Qatar Airways to Boeing; $1.2 trillion from the UAE; and $600 billion from Saudi Arabia, including a $142 billion defense package.
International investors are flocking to the region. US companies like Amazon Web Services, Nvidia, and Oracle have launched large-scale operations in tech and AI along with broader projects supporting the region’s economic transformation.
“Energy transition continues to attract attention,” notes Abbas Husain, global head of Infrastructure and Development Finance at Standard Chartered, “not only in renewables such as solar and wind but also in emerging technologies like green hydrogen and carbon capture. Transport infrastructure also remains a priority, particularly as countries build out logistics hubs and regional connectivity networks. In parallel, digital infrastructure, including AI, data centers, and smart city solutions are seeing substantial investment. There is also growing interest in social infrastructure, including education and healthcare.”
Expanding Influence Through Investments
These mega deals, and the renewed relationships at leadership level, suggest that a US-GCC tandem will be shaping the future of the region, be it at home in the Gulf or in the wider region where Gulf states are leveraging their ample financial means to extend their influence, often counterbalancing Iran.
Syria stands out in this respect. After 14 years of a devastating civil war, the decision in May by the US and Europe to lift sanctions cleared the way for investment from the Gulf.
“The US has given a green light for economic cooperation with the new Syrian government,” says Jihad Yazigi, founder of The Syria Report, an online information and advisory service focused on Syria’s economy. “Lifting the sanctions will not bring an influx of US capital—I don’t think this was the goal—but it will allow Gulf countries to step in and really talk about reconstruction.”
In May, UAE port operator DP World signed an $800 million memorandum of understanding with Syria’s new government to develop and operate the port of Tartous on the Mediterranean coast, a multi-facetted project that includes industrial areas, logistics hubs, and free trade zones. Further deals are expected to follow, especially with Saudi Arabia and Qatar, which settled Syria’s $15.5 million debt to the World Bank and are paying most government salaries.
On the private-sector front, Doha-based UCC Holding already leads a $7 billion power project in Syria while Qatari food and beverages firm Baladna pledged $250 million for a new industrial project. A longtime supporter of the Syrian uprising against ousted dictator Bashar al-Assad, Qatar has announced further investments in the Damascus airport and is exploring opportunities in sectors including media, tourism, industry, and logistics.
The pace of such investments will help determine how fast Syria’s banking system can get back on its feet after being cut off from international finance for over a decade. In mid-June, the nation was reconnected to the SWIFT financial messaging system for the first time since 2011. At present, the only foreign banks operating in Syria are regional lenders from neighboring countries including Lebanon, Jordan, and Bahrain.
“For the banking sector, international or cross-border banking relations will resume first with countries like Turkey, Lebanon, Jordan,” Yazigi predicts. “The US will remain cautious.”
The GCC is also extending its strategic economic footprint in Egypt. Last year, the UAE essentially bailed out Cairo with a $35 billion development package. Qatar and Saudi Arabia are following suit with billions in investments covering energy, infrastructure, real-estate, tourism, and other sectors in the pipeline.
And Gulf countries are taking center stage in regional diplomacy, including negotiations over conflicts in Lebanon, Gaza, Iran—where Oman acted as a mediator—and Israel.
In 2020, the previous Trump administration brokered deals between Israel and the UAE, Bahrain, and Morocco. At the time, there was hope Saudi Arabia would be the next big country to join the Abraham Accords. While the war in Gaza has put the normalization process on hold, Gulf leaders continue to promote the vision of a pacified region where liberal trade and cross-border business transcend wars.
Since 2020, more than 600 Israeli companies have started working in the UAE, among them Liquidity, an AI-driven fintech direct lender that manages a multi-billion-dollar portfolio. Its largest office is now in Abu Dhabi, and its second largest in Tel Aviv.
“We are in the region because we believe it is the best place to bring talent and develop technology, and I don’t see this changing” says Ron Daniel, CEO of Liquidity. “The UAE is the use case of how this region could look.”
While Israeli entities cannot officially trade with Saudi Arabia, the UAE often acts as a gateway, re-exporting goods and services to the Gulf market and beyond. By 2040, Tel Aviv expects to raise the value of its exports through Dubai from $150 billion to $1 trillion.
“Behind the scenes, there is a lot of collaboration, a lot of business happening,” says Daniel. “That’s good for peace and the region, but on the table, it has to wait until the politics allow it.”
Deficit Headwinds
While the GCC uses its leverage to pave the way for a new regional order, it also faces growing challenges.
The bloc is weathering global volatility better than many neighbors, thanks to deep financial reserves and fiscal buffers, but its dependence on oil remains a vulnerability. A $10 drop in prices, for example, cuts Saudi Arabia’s fiscal balance by an estimated 2.25% of GDP. The kingdom is now grappling with its highest fiscal deficit since 2021, and Goldman Sachs has warned it may more than double its 2025 budget gap.
To sustain their economic ambitions and continue funding massive infrastructure projects, Gulf countries are turning to international debt markets. In the second quarter alone, Saudi Arabia raised $6 billion in US-denominated sovereign bonds and is expected to issue more by the end of the year.
While the GCC’s collective debt-to-GDP ratio remains relatively low at around 30% and is considered sustainable, borrowing at this scale is a new phenomenon for the region. Some observers anticipate rising debt levels becoming a worry for foreign investors and raising questions about the viability of such flagship projects as Neom, Saudi Arabia’s $500 billion, futuristic city in the desert.