The war between the United States and Iran has forced Gulf nations to overhaul their investment strategy, directing capital into infrastructure ranging from pipelines to ports as they try to absorb the economic fallout of the conflict, according to Reuters. The war has exposed the Gulf's heavy reliance on the Strait of Hormuz, a passage that once carried 20% of global oil flows but has long been vulnerable to Iranian threats of disruption.
With the strait largely blocked for most of the past six months, Gulf energy exporters have made a burst of billion-dollar investment commitments aimed at future-proofing economies now facing a sharp slowdown, Reuters reports. Trade has been redirected toward Saudi ports on the Red Sea and the UAE's eastern ports, though both offer smaller capacity, and an unnamed industry source told Reuters that Gulf governments are looking at permanent, integrated ways to bypass the strait altogether.
'Ports, ports, ports'
While most Gulf governments can draw on decades of accumulated oil wealth, some may turn to external capital as they pursue ambitious foreign investment targets, with large infrastructure funds and international investors showing growing interest in the region's assets, Reuters reports. Costs could run into the hundreds of billions of dollars in the coming years, and Gulf sovereign wealth funds, among the largest in the world, are already accelerating the push. A second industry source described ports as a "mission-critical priority" for Gulf governments, including Saudi Arabia, telling Reuters: "I think for the time being... they're going to say ports, ports, ports."
Abu Dhabi's sovereign wealth fund L'Imad said last week it plans to buy out the remainder of AD Ports as it overhauls the company's strategy. AD Ports, which operates terminals across the UAE and internationally, saw its UAE container throughput and bulk cargo volumes fall by around two-thirds in the second quarter compared with a year earlier, with the company describing the period as one of the most significant challenges in its 20-year history. Dubai's DP World, one of the world's largest port operators, also reported declining business in the first half of the year. The company plans to develop two container terminals in Fujairah, where the UAE is building a new oil pipeline set to double crude capacity to the emirate once operational next year, alongside inland container depot projects elsewhere in the UAE.
Zin Bekkali, chief executive of UK-based Silk Invest, told Reuters that Gulf governments have sufficient capital to fund much of this accelerated infrastructure investment internally. Saudi Arabia has separately fast-tracked plans worth billions of dollars to reroute oil away from Hormuz, including expanding the capacity of its crude pipeline to the Red Sea coast, sources told Reuters last month, a move that could also help neighbouring countries transport oil without crossing the strait.
Wider economic fallout
Beyond shipping disruption, strikes on production facilities across the Gulf have significantly affected oil refineries, aluminium plants and data centres, while air traffic remains below pre-war levels, weighing on tourism and business travel through the region. The war has also dented the Gulf's reputation as a safe economic haven. According to a Reuters poll, Qatar and Kuwait's economies are set to shrink by just over 8% this year, while Saudi Arabia's economy is expected to grow by 1.4%, down sharply from 4.5% growth in 2025. Qatar, previously one of the world's leading liquefied natural gas exporters, depends entirely on the strait for LNG exports and is also facing major production shortfalls due to damage to its energy facilities.
Kuwait Petroleum Corporation is in talks with Saudi Arabia and the UAE to expand pipeline capacity to accommodate its oil shipments, Reuters reports, while Iraq is working to expand exports through Turkey's Ceyhan port and aims to begin exporting oil through Syria's Baniyas and Jordan's Aqaba via new pipelines.
Although the Strait of Hormuz has seen some recent easing, trade through it remains limited, and there is no clear resolution in sight to the underlying conflict between Iran and the United States despite a cooling of active hostilities. Turkey and Saudi Arabia aim to build a railway linking the two countries with Jordan and Syria within the next three to four years, Turkey's transport minister said in June, with other Gulf states expected to join the project. Afaq Hussain, a former senior fellow at the Atlantic Council's Middle East Initiative, told Reuters the Hormuz crisis had underscored that such vulnerabilities are real and can emerge at any chokepoint at any time, arguing that backup trade and transport routes are necessary even when they initially appear uneconomical.
Source: Reuters
