Gulf countries may reassess overseas investments, as the situation in Iran impacts sovereign wealth fund allocations

The spillover effects of the US-Iran conflict continue to expand, and the global capital markets are facing a new source of uncertainty—whether the investment commitments of Gulf sovereign wealth funds can be fulfilled. On Friday, according to the Financial Times, as the US and Israel continue their military actions against Iran, budget pressures in Gulf countries have surged, and at least three of the four major Gulf economies—Saudi Arabia, the UAE, Kuwait, and Qatar—have begun joint consultations on budget and economic pressures, initiating internal reviews to assess whether force majeure clauses can be invoked while re-evaluating existing and future overseas investment commitments. Gulf sovereign wealth funds are large and highly active, and their investment trends have always been an important barometer for global capital markets. After Trump's visit to the region last year, Saudi Arabia, the UAE, and Qatar committed to investing hundreds of billions of dollars in the US. The three countries are also significant sponsors of global sporting events and continue to invest heavily in domestic economic diversification. A consultant from a Gulf country revealed that this trend has caught the attention of the White House. The aforementioned three countries had committed to investing hundreds of billions of dollars in the US after Trump's visit to the Gulf region last year. If related investment plans change, it will have a direct impact on the US and other Western markets and may further increase the pressure on Trump to seek diplomatic solutions. Budget Pressure: Three Major Gulf Economies Initiate Investment Review A Gulf official told the Financial Times, "Several Gulf countries have initiated internal reviews to determine whether force majeure clauses can be invoked in existing contracts, while conducting a comprehensive assessment of current and future investment commitments to alleviate the anticipated economic pressures brought about by the current war—especially as the war and related expenditures continue at the current pace." The official pointed out that this move is a preventive measure rooted in budgetary tensions caused by multiple overlapping factors: energy revenues have declined due to production slowdowns or transportation disruptions, the tourism and aviation industries have been hit, and at the same time, defense spending has surged. The official stated that the review may cover investment commitments to foreign governments or enterprises, sports sponsorships, commercial contracts, and even the sale of existing holdings. Strait of Hormuz Blocked: Energy and Trade in Crisis The immediate trigger for this round of shocks is Iran's large-scale retaliation against the Gulf region. Iran has launched fierce reprisals against US allies in the region, leading to near paralysis of shipping in the Strait of Hormuz—a key waterway through which about one-fifth of the world's oil and gas transit—resulting in at least 10 oil tankers being attacked in the Gulf region. Qatar, as the world's second-largest liquefied natural gas producer, announced this week that it invoked force majeure after its main liquefied natural gas plant was attacked by drones and forced to halt production. A large refinery in Saudi Arabia was also hit. According to CCTV News, on the 3rd, a spokesperson for the Qatari Ministry of Foreign Affairs, Ansari, stated that recently, during Iran's attack on the US military base at Al Udeid in Qatar, Qatari energy facilities were affected, but the damage is controllable, and Qatar is conducting a technical assessment. At the same time, Iran has also attacked US military bases and embassies in the region, as well as airports, hotels, and residential buildings, severely disrupting regional air traffic and tourism Hundreds of Billions of Dollars in Investment Commitments Hang in the Balance, White House Warned A Gulf government advisor stated that the possibility of reviewing these investments has caught the attention of the White House. Analysts believe that any measures affecting investments in the U.S. or other Western countries will further increase pressure on Trump to seek diplomatic avenues and promote de-escalation of the conflict. Additionally, Gulf countries had previously urged Trump to postpone military action against Iran and seek a diplomatic solution, but ultimately bore the brunt of Iran's large-scale retaliation. Prominent Emirati businessman Khalaf al-Habtoor publicly questioned Trump on social media, directly expressing dissatisfaction in the Gulf region. "A straightforward question: Who authorized you to drag our region into war with Iran? What is the basis for your dangerous decision?" he wrote on the X platform, "Did you consider the collateral damage before pulling the trigger?"