The announcement of a 15-day truce between the U.S. and Iran brings some relief, but it doesn’t yet mean the conflict is over. For Gulf countries, this is welcome news, though caution is still warranted. The fact is, key pillars of their economic model have been shaken by this conflict. That said, the impact varies from country to country. And crucially, the Gulf economies have remarkable resilience when it comes to weathering major crises.
According to estimates from the Institute for International Finance, net resident capital outflows from the Gulf reached USD 271 billion in 2025, while net non-resident capital inflows amounted to USD 228 billion. Since their 2022 peak, the oil prices and export revenues of the Gulf Cooperation Council (GCC) have been declining. However, the GCC has never before invested abroad as much, despite the drop in its current-account surplus. The surplus fell from 15.7% of GDP in 2022 to 8% in 2023, 5.9% in 2024 and 3.8% in 2025. At the same time, net resident capital outflows from the region rose by 10% (2023–2025).
The volatility of oil prices reflects the uncertainties of the international environment. After falling in April following President Trump's announcement of "reciprocal" tariffs, oil prices rose by around ten dollars during the 12 days of conflict between Iran and Israel, before falling again since the ceasefire agreement.
The fall in global oil prices is one of the most dramatic effects of the uncertainty generated by the tightening of US trade policy. The price of Brent crude is now expected to average USD 65 in 2025-2026, compared with USD 80 in 2024, and the risks of a further fall are high. For the Gulf States, where hydrocarbons account for 60% of budget revenues and 70% of exports, the consequences will be manifold.
Although tensions in the Middle East and the geopolitical risk have risen sharply since October 2023, there have been contrasting developments in the maritime trade and energy markets. While the cost of some freight categories has risen, oil prices have fallen, mainly due to abundant supply. An escalation of the conflict is still a possibility and would drive energy prices higher. In an already tense market, the price of LNG on the European market is particularly sensitive to the geopolitical context. It is against this backdrop of geopolitical tension and depressed oil markets that the Gulf countries are seeing their financing requirements increase. Furthermore, as part of their diversification policy, they need a peaceful regional environment, particularly in the Red Sea.
Energy and mineral commodities are central to the low carbon transition process. Latin America, which boasts abundant amounts of minerals and key metals for the transition, and GCC[1] countries, which are dependent on revenue from hydrocarbons, are seemingly, on the face of it, taking contrasting paths on the transition journey. However, the macroeconomic consequences cannot easily be determined currently. Gulf countries have some advantages in the oil market, but the pace of the transition could affect revenues more quickly than expected. In Latin America, while the size of critical minerals reserves is brightening the outlook, various national strategies and numerous constraints could curb the scale
The Gulf countries (GCC) – Saudi Arabia, Bahrain, United Arab Emirates, Kuwait, Oman and Qatar – are experiencing an economic boom. The discipline of the cartel of oil-producing countries and international geopolitical tensions are keeping oil and gas prices high and feed into the fiscal and external accounts of countries still highly dependent on oil revenues. Contrary to previous periods of economic upturn, it seems that most governments are maintaining a degree of fiscal discipline, which, over the medium term, should reduce vulnerability to variations in oil revenues. In the longer term, climate change and the associated energy transition pose an existential challenge for these hydrocarbon-based economies
