Trump burns Gulf capital, not just its oil

Why did US President Donald Trump choose to open the first foreign tour of his second term with a visit to the Gulf states? The answer is straightforward: these countries are no longer confined to their role as oil exporters. They have transformed into massive hubs for the export of capital, assets that the real estate developer-turned-president is eager to attract further.

Iran's closure of the Strait of Hormuz, in retaliation against American-Israeli aggression, has severed a significant portion of Gulf petroleum exports. This disruption is generating growing pressure on the region to liquidate its financial investments in the US and other developed markets, a crisis that is becoming one of Trump's "friendly fire" incidents, striking, as usual, at the heart of the American economy.

At the onset of the war, most analyses and commentaries focused on the immediate impact on energy markets, given that the Persian Gulf accounts for approximately 28% of global crude oil exports. But after 40 days of US and Israeli attacks, and Iranian retaliation paralyzing global trade, the analytical focus shifted to supply chain disruptions, repercussions extending from commodities like fertilizers and aluminum to electronic chips. As CNN noted, a crisis that began with oil has now permeated everything.

These disruptions have since spread into financial markets. Yields on US government bonds have risen, a clear indicator of how investors are pricing risk. Some have begun to question the continued viability of the petrodollar system, now that Iran has demonstrated the capability to sever the flow of Gulf oil at its source.

Despite the current momentum and the fragile truce, should the war resume and expand, broader debates will likely emerge regarding the Gulf's role as a financial investor in Western and developed markets.

Over recent decades, the Gulf states, particularly the smaller nations with vast oil wealth, have evolved into primary sources of global capital. The clearest expression of this is the commanding presence of sovereign wealth funds managed by the governments of Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait. Total assets held by these funds are estimated at $5 trillion in 2025-2026, diversified across government bonds and bills, equity stakes in major corporations, such as Saudi investments in X , and infrastructure assets like Heathrow Airport, where the Saudi sovereign fund holds a 15% stake.

In the wake of this massive expansion of Gulf financial investment, the war may sever the flow of capital from East to West, or perhaps reverse its direction back toward its home base in the Gulf.

Liquidation to offset losses

The primary driver that may redirect global capital flows is the need for Gulf governments to compensate for losses resulting from the disruption of their oil and gas export capabilities. Energy still dominates Gulf exports, accounting for approximately 80% in Saudi Arabia. Even in the UAE, widely regarded as a successful model of economic diversification, fossil fuel exports still represent between 50 and 60% of total commodity exports. Compensating for the revenue shortfall will require either increased borrowing or the liquidation of overseas assets. Even if the current truce holds, restoring full export capacity is expected to take several months.

Alongside these economic pressures, there are political considerations in how Gulf governments use their position as capital exporters to manage their geopolitical standing. The recent Iranian attacks have introduced a new sense of vulnerability, underscoring the risks of a security partnership in which the United States exposes its allies to danger without tangibly defending their interests.

In this context, Gulf investments may be redirected away from the United States as a gesture of discontent with Trump. Alternatively, Gulf states may move toward greater use of the Chinese yuan or other Asian currencies, offering their exports a better chance of bypassing the Strait of Hormuz.

These remain uncertain scenarios. But they are likely weighing heavily on the minds of Gulf policymakers, and they will undoubtedly shape the future not only of global finance, but of the international political economy as a whole.