Fiscal strains from the Iran conflict are forcing Saudi Arabia, Qatar and the UAE to prioritize domestic spending over their nearly $4 trillion US investment commitments, a new PIIE report warns. The war’s impact on Gulf economies far exceeds global averages, reshaping regional growth models.

  • The Iran war has weakened Gulf states’ fiscal positions and growth prospects.
  • Domestic investment priorities are rising at the expense of US commitments.
  • US tariff pressure could further complicate Gulf‑US investment relations.

The ongoing conflict between the United States and Iran is making it increasingly difficult for Gulf countries—Saudi Arabia, Qatar and the United Arab Emirates—to honor the nearly $4 trillion in economic commitments to the US announced under President Donald Trump’s “America First” agenda, according to a new 15‑page report from the Peterson Institute for International Economics (PIIE).

PIIE’s analysis highlights that the Gulf states are facing mounting economic pressure from the US‑Israel war on Iran, forcing them to spend more on defense, energy infrastructure and trade. The report notes that the war has weakened their confidence in the US security umbrella and could have lasting effects on their growth models.

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While the International Monetary Fund (IMF) trimmed its 2026 global growth forecast by 0.3 percentage points, the cuts for Gulf states were far steeper: Qatar’s forecast fell 14.7 points to 8.6%, Saudi Arabia’s dropped from 4.5% to 1.7% and the UAE’s fell to 1.7% as well.

Despite possessing sufficient financial assets and borrowing capacity to avoid an immediate crisis, PIIE warns that the economic pressure could push these countries to prioritize domestic spending over US investments. Saudi Arabia has already begun rebalancing toward domestic investment before the war; the conflict appears to have reinforced that shift. The Public Investment Fund’s international portfolio share has fallen 10 percentage points over the last six years to 20% from 30% in 2020.

Why This Matters

BozokMedia analysis shows that delays in fulfilling investment commitments could invite additional pressure from the White House, which has previously used tariffs to push partners to follow through. Trump’s 2026 threat to raise tariffs on South Korean goods over delayed implementation of the US investment agreement illustrates this trend.

"Gulf investment decisions are pivotal to global financial stability, and any delay could negatively affect U.S. markets," says finance expert Dr. Ravi Shukla.

Political concerns also loom large. The lack of clear definitions, timelines, and measurement metrics for investment commitments could hamper assessment of compliance. Congressional members have raised questions about the economic and national security implications of Gulf investments, governance, and potential conflicts of interest. An example is a $2bn investment in Binance by a UAE‑backed firm, tied to a stablecoin issued by a Trump‑family-linked crypto company, which drew scrutiny from Senators Warren and Merkley. Trump’s 2025 pardon of Binance founder Changpeng Zhao further complicates the narrative.

Did You Know?: QatarEnergy began LNG production in Texas in March and exported the following month, positioning itself as a key partner in U.S. energy supply chains.

Frequently Asked Questions

Q1: Are Saudi Arabia, Qatar and the UAE still required to invest in the U.S.?

A1: The report indicates that their investment obligations lack clear definitions, making compliance more flexible.

Q2: Will U.S. tariff policy further pressure these Gulf states?

A2: Yes, the Trump administration has historically used tariffs to compel partners to meet their commitments.