Fiscal pressure from Iran War clouds Gulf States’ US spending plans

What the report says

A new analysis from the Peterson Institute for International Economics says the conflict involving the United States and Iran is adding fiscal strain to Saudi Arabia, Qatar and the United Arab Emirates, potentially complicating nearly $4 trillion in economic commitments those Gulf states announced under President Donald Trump’s “America First” agenda. Al Jazeera reported that the 15-page study, released Monday, argues the war has increased pressure on the three countries to spend more on defence, energy infrastructure and trade, while weakening confidence in the US security umbrella in the Gulf.

The report says the economic hit has been sharper for the Gulf than for the global economy as a whole. It cites steep downward revisions to growth forecasts from the International Monetary Fund for 2026, including large cuts for Qatar, Saudi Arabia and the UAE. PIIE said the countries still have enough assets and borrowing capacity to avoid an immediate funding crisis, but may choose to prioritise domestic investment over projects in the United States.

The article adds that Saudi Arabia had already been shifting more of its investment focus inward, and that its Public Investment Fund has reduced the share of its portfolio in international assets over recent years. Qatar is still pursuing US energy investments, including work tied to liquefied natural gas in Texas, while also seeking to replace capacity lost after attacks damaged its facilities. PIIE also warned that delays or ambiguity around the commitments could invite political pressure in Washington, where lawmakers have raised concerns about Gulf investments and related business ties.