A trade deal between the US and Gulf countries is likely given the nature of trade and small size of the GCC trade to the US. Reducing tariffs to zero between the US and the bloc would represent export gains to the region of around USD1.5bn, a small amount compared to total trade. The Gulf Cooperation Council (GCC) and US total trade is currently below USD100bn, which represents a drop since the peak before the global financial crisis in 2008 and the fracking revolution in the US, which reduced US oil imports from the region. Meanwhile, total trade with China since 2008 has doubled to above USD300bn in 2023. While tariffs have not been a major blow to the region’s economy, the projected drop on global GDP growth and global uncertainties have hit the region’s main revenue source: oil prices have collapsed below 70USD / barrel. This alongside moves in yields throughout the Gulf sets the stage for intensified financial tightening.

As a new trading system emerges with China and the US with lesser direct links, the Gulf region is becoming a reexporter hub for businesses across the world. Notably, the UAE has become a world leading financial and service export hub, as the Emirates is the most diversified economy in the region. The UAE ranks #1 in our list of Next Generation Trade Hubs, as the Jebel Ali port – among the top 10 largest global ports – enables trade between Asia, Europe and Africa, as well as to North America. As supply chains seek to derisk exposure to potential tariffs in the US and China, hubs such as Saudi Arabia and the UAE can take leverage and lead bringing new businesses.

Oil prices collapse during the month of April do bring fiscal headaches to the region. Saudi Arabia’s drop estimated at USD22bn on the back of 6% drop on non-oil GDP. Kuwait is projected to have the largest drop of non-oil GDP revenue of around -16%, an estimated USD13bn. Oman and the UAE are to follow with -6% and -4% respectively (USD4bn and USD13bn). Qatar has been spared as it is a major natural gas exporter and continues to enjoy elevated prices. The significant drop in oil prices could force policymakers to downsize their ambitious spending projects on everything from new futuristic cities to stadiums to host international sports events. We also see these investment deals as de-escalation efforts which will pump up oil prices and provide relief to the region. Meanwhile, the region is likely to rely on debt to fill the fiscal gap. The drop in oil prices has not yet decreased investment in Saudi Arabia as the oil-rich nation has relied on debt to continue spending, as it did in 2016-2017. In Q1 2025, spending increased by 5% y/y, taking the fiscal deficit to the highest level since 2021, above USD15bn. The oil price decline of 2015-2017, which brought prices below USD50 for more than 48 months, saw a decline in government spending of -54%. Together with Abu Dhabi, Riyadh has been among the most active issuers of USD denominated debt in recent years. Likewise, Kuwait recently passed a new law to allow for new debt issuance.