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DUBAI, United Arab Emirates — The affluent Arab Gulf nations are currently in a stronger position than many global regions to navigate the economic repercussions of tariffs implemented by U.S. President Donald Trump, as suggested by economists and regional investors. However, uncertainty surrounding oil prices poses a potential threat to the fiscal stability and development initiatives of these countries.
The Gulf Cooperation Council (GCC) comprises Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Oman, and Qatar, collectively holding approximately $3.2 trillion in sovereign financial assets. This amount represents about 33% of the total sovereign assets worldwide, as noted by GCC Secretary-General Jasem Mohamed Albudaiwi. Additionally, the GCC controls roughly 32.6% of the world’s verified crude oil reserves, according to the Statistical Center of the Cooperation Council for the Arab States of the Gulf.
This vast oil wealth positions the region as an influential player in the context of U.S. policies while simultaneously making it susceptible to fluctuations in those policies. Trump has consistently urged OPEC, the oil-producing consortium led by Saudi Arabia, to increase oil production to reduce prices and alleviate inflationary pressures in the U.S. However, declining oil prices could exacerbate budgetary deficits and disrupt the spending plans of GCC nations, whose economies remain deeply intertwined with oil revenue despite ongoing diversification efforts.
Strengthening Ties with the Trump Administration
Ben Powell, BlackRock’s chief investment strategist for Asia-Pacific and the Middle East, based in Abu Dhabi, indicated that the region’s cordial relations with Trump bolster its negotiating position regarding tariffs. Some GCC countries have also enhanced their roles in international diplomacy, as exemplified by Saudi Arabia’s facilitation of peace discussions aimed at resolving the conflict in Ukraine, which has increased its significance to Washington.
“Given the Middle East’s strong ties with the U.S., I believe they will navigate this situation relatively well,” Powell remarked during an interview with CNBC’s “Access Middle East.” “While the entire region may face some turbulence in the near term, I anticipate that the Middle East will emerge as a comparative beneficiary in the landscape of emerging markets over time due to its significant financial strength and ongoing energy support.”
Monica Malik, chief economist at Abu Dhabi Commercial Bank, reflected on the direct consequences of the tariffs, noting that the U.S. is not a primary export market for the Gulf region. In her recent report, she concluded that “the GCC is positioned relatively well to withstand external challenges, particularly the UAE.” Despite the introduction of a blanket 10% tariff and earlier tariffs on foreign steel and aluminum, “we expect the immediate impact to remain limited, given that the U.S. constitutes only about 3.7% of the GCC’s total exports in 2024,” she stated.
Concerns Over Budget and Spending Plans
Nonetheless, the forecast for oil prices is crucial for the fiscal health and future developmental projects of Gulf states, particularly Saudi Arabia, which is pursuing ambitious mega-projects as part of its Vision 2030 initiative aimed at economic diversification away from oil dependency. Ironically, the success of this vision is heavily reliant on stable oil revenues.
As of Wednesday, global benchmark Brent crude was trading at $61.44 per barrel, reflecting a nearly 17% decline year-to-date. A surprise decision by OPEC+ to hasten planned production increases has further increased global supply pressures. According to the International Monetary Fund, Saudi Arabia requires oil prices to exceed $90 a barrel to balance its budget. Recently, Goldman Sachs revised its 2026 oil price projections downward, estimating Brent to be $58 and WTI to be $55, a substantial decrease from their previous forecasts.
“Weakening global demand paired with expanded supply introduces the possibility of negative adjustments to our Brent price outlook for 2025,” cautioned Malik in her comments to CNBC. OPEC+ anticipates an increase in oil production levels by May, but Malik believes the group may reconsider that strategy if crude prices remain stagnant or decline further. She expressed concern that a sharp, enduring drop in oil prices could necessitate a reassessment of both government and off-budget spending plans, including capital expenditures, potentially impacting the banking sector’s liquidity and overall market confidence.
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