Iran war deals blow to global markets’ ‘Gulf put’
BREAKINGVIEWS-Iran war deals blow to global markets’ ‘Gulf put’ The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By George Hay
LONDON, May 27 (Reuters Breakingviews) - In the 1990s, investors learned to place their faith in the “Greenspan put”. The theory was that then-Federal Reserve Chair Alan Greenspan would cut interest rates if markets sagged, propping up global asset prices. More recently, money managers and dealmakers have grown used to similar support from the Middle East. For at least the past two decades they have enjoyed a “Gulf put” – the confidence that oil riches from the United Arab Emirates, Saudi Arabia and other states would be the marginal buyer of assets as diverse as U.S. Treasury bills, takeover targets like Electronic Arts EA.O, and sporting trophies like Newcastle United Football Club. The Iran war puts all this in flux.
The UAE, Saudi, Kuwait, Qatar, Bahrain and Oman had $4 trillion in public overseas assets in 2025, the International Institute of Finance estimates. That treasure chest, which is divided between official reserves and sovereign wealth funds, represents the accumulated oil-fueled surpluses in the six Gulf states’ current accounts, which reached 15.7% of their collective GDP in 2022. Even though this had fallen sharply to 4.6% of GDP by 2025, the average value of these surpluses since 2019 amounted to an incremental $150 billion a year of investment firepower, according to a Breakingviews analysis of IIF data.
The consequences of this financial heft are visible across the developed world. Gulf states have snapped up some of Europe’s best soccer clubs, like UAE-owned Manchester City and Qatar-backed Paris Saint-Germain, and launched forays into other sports like mixed martial arts, boxing and golf. Investors from Doha and Abu Dhabi now own prestige London assets including the Harrods department store, Canary Wharf real estate development and Annabel’s nightclub. Gulf-based sovereign wealth funds routinely sink billions of dollars into private equity and venture capital vehicles - witness the $20 billion advanced by Saudi's Public Investment Fund to Blackstone's BX.N U.S. infrastructure venture, or the $60 billion Saudi and the UAE jointly committed to Japanese investor SoftBank's 9984.T first $100 billion Vision Fund.
These outflows have probably now peaked. The average Gulf state's current account surplus could in a pessimistic scenario shrink to just 3.3% of GDP in 2026, the IIF reckons, as the blocked Strait of Hormuz chokes oil exports. At $100 per barrel, a six-month interruption to the 20 million barrels of oil and products that previously passed through the Strait every day - assuming half these flows can be diverted via pipelines - amounts to $183 billion of lost revenue.
Gulf states are also rethinking their spending priorities. Consultant Rystad Energy puts the cost of repairing energy infrastructure in the region at as much as $58 billion. A new pipeline to bypass the Strait and deliver oil to ships in the Indian Ocean might cost $55 billion. Tehran's attacks on its neighbours mean Saudi, the UAE and Qatar will also spend substantially more on defence.
This adds up to a big dent in the Gulf put. It's an interruption to at least two years of the usual $150 billion of average annual outflows, one Middle East financier told Breakingviews. Even in an IIF scenario where the disruption lasted much of the rest of the year but the region overall loses only 4 million barrels of daily oil exports - under half the likely current figure - the impact would be stark. Resident outflows, a wider measure of cross-border money movements, could slump by a third to $245 billion this year, the IIF estimates.
The turmoil in the region may also disrupt the money that was coming in. Last year the Gulf attracted $334 billion in net capital inflows from non-residents, via the likes of foreign direct investment and foreign purchases of shares and bonds. If the Strait remains blocked for the rest of the year these flows could sink by 25%, the IIF reckons. Gulf states would have less cash to support their economies, further crimping spending abroad.
The effects will be felt around the world. Big-ticket punts like Paramount Skydance's PSKY.O, successful $111 billion takeover of rival media giant Warner Bros Discovery WBD.O would be harder to finance: investors from Saudi, Qatar and the UAE contributed $24 billion in equity to that transaction. Investment bankers will find it harder to drum up competitive auctions for shiny assets like luxury carmaker Aston Martin - 17% owned by the Saudi PIF - if they cannot dangle the possibility that a deep-pocketed Gulf wealth fund might swoop in. Prices for high-end property in London and other desirable locations would lose a key source of support.
The Gulf put was already losing some of its clout before the U.S. and Israel attacked Iran. Saudi Arabia has run a current account deficit since 2024 and the PIF already aims to deploy 80% of its assets at home as the Kingdom tries to diversify its economy away from oil. However, Qatar and the UAE enjoyed current account surpluses of 15% and 14% of GDP, respectively, in 2025. Both of these will be much smaller this year.
For now, sovereign investors from the Middle East are doing their best to insist it's business as usual. According to bankers and private equity experts, none of the Gulf states wants to be seen to be reining in their flagship funds. While the flow of cash from central government will inevitably be smaller, the IIF’s estimate of a $245 billion outflow from the region in a stressed scenario still represents a huge wall of cash heading into other markets. The $1.1 trillion Abu Dhabi Investment Authority and the $600 billion Qatar Investment Authority, which exist to invest outside their home countries, look set to remain active players in global markets.
Less visible and quirkier investments will feel the pinch, though. Smaller funds like Abu Dhabi’s $385 billion Mubadala and $300 billion L’Imad are still striking big deals, but might focus more on domestic priorities. Mid-tier private equity investors may discover that flows into their funds from the Gulf have dwindled. And high-profile but financially dubious ventures like the struggling Saudi-backed LIV Golf circuit will serve as a warning against future adventures.
For the global economy this may seem surmountable. Yet when equity markets are inflated by an AI bubble, it would be a comfort to think there are pools of capital waiting to step in when valuations come under strain. Instead, the glory days of the Gulf put are firmly in the past.
Follow George Hay on Bluesky and LinkedIn.
(Editing by Peter Thal Larsen; Production by Shrabani Chakraborty)
((For previous columns by the author, Reuters customers can click on HAY/george.hay@thomsonreuters.com))
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