How the Iran War is draining Wall Street tech funding |
Opinion National Interest PoV 50-Word Edit
ThePrint On Camera Videos In Pictures
Society & Culture Around Town Book Excerpts Vigyapanti The Dating Story
More Judiciary Education YourTurn Work With Us Campus Voice
Opinion National Interest PoV 50-Word Edit
ThePrint On Camera Videos In Pictures
Society & Culture Around Town Book Excerpts Vigyapanti The Dating Story
More Judiciary Education YourTurn Work With Us Campus Voice
How the Iran War is draining Wall Street tech funding
A 'disappearing' flow of Middle Eastern dollars could force American AI giants into risky debt as Gulf capital pivots to domestic needs.
Economic concerns about the spillovers from the Iran war have focused on the global flow and availability of critical materials. There is, however, another, much less appreciated war risk for the United States: the supply of dollars from the Gulf, especially to capital-hungry US tech firms and their financial intermediaries.
Gulf Cooperation Council (GCC) economies—including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—have dramatically grown and transformed their sovereign wealth fund (SWF) vehicles over the last decade, as part of efforts to diversify away from volatile energy-price cycles. Today, the region hosts some of the world’s largest SWFs, with around a dozen sovereign funds (led by Saudi Arabia and the UAE) managing somewhere between $4–$6 trillion in assets, according to estimates from SWF trackers and the International Monetary Fund. Just last year, the region’s sovereign funds are estimated to have invested more than $120 billion, with the United States by far the largest single beneficiary.
This shift in focus has included greater emphasis on foreign illiquid private investments, especially in the United States, as well as greater cross-border business to help develop non-energy industries at home. Indeed, the Gulf’s financial and technology-related conferences had become highlights of the annual travel calendar for the world’s largest institutional investors, akin to Davos in Switzerland or Milken in Los Angeles. Both sides have been eager to increase cross-border, profitable relationships.
Now, however, GCC budgets are under strain: the war has largely disrupted energy exports and dramatically slowed other revenue streams, such as tourism. At the same time, domestic capital needs have grown, including increased defense spending and repairs for damaged infrastructure. Fiscal outlooks are deteriorating. These developments contributed to a decision by Moody’s Ratings to downgrade Bahrain’s outlook to “negative” from “stable” in late April. They also likely spurred talks that are reportedly taking place between the US Treasury Department and some GCC governments about Washington providing emergency dollar liquidity to the region if the Iran war persists and continues to disrupt oil shipments through the Strait.
However long the conflict lasts, GCC capital to the United States will not dry up. These economies run consistent, large current-account surpluses that will continue to be “recycled,” including into a broad array of US financial assets. But a potential reduction in the flow of funds in 2026 could still be a significant challenge for US beneficiaries.
US hyperscalers might need to lean more on debt to fund their artificial intelligence (AI) aspirations, a trend that over the last year has made investors more cautious about those firms’ balance sheets and valuations. Less GCC capital could also translate into fewer fees for financial intermediaries that are involved in these “capital supply chains,” some of whom are already struggling to successfully attract and........