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War on Iran threatens global Gulf capital flows: FT analysis

Al Mayadeen | March 23, 2026

The war on Iran could disrupt the flow of Gulf capital across global markets, raising concerns about broader financial stability, according to economist Mohamed El-Erian, writing to the Financial Times.

While much attention has focused on energy markets and the resumption of oil production and shipments, El-Erian argued that an equally important issue is how the war may affect the Gulf’s relationship with international capital markets in the short term.

The six members of the Gulf Cooperation Council (GCC), Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, have become major global financial players over decades, investing heavily across international markets.

El-Erian noted that there is a risk of a temporary shift in capital flows as Gulf countries face increased domestic financial demands amid the war, even if their long-term investment role remains intact. Such a shift could impact global interest rates and the distribution of funding, given the world’s growing reliance on GCC capital.

Before the US-Israel war on Iran, GCC countries had already established themselves as influential forces in global finance, not only as energy suppliers but also as major hubs for transport, tourism, and liquidity.

The region generated a current account surplus exceeding $800 billion over the past four years and has deployed its financial resources across global markets, including public and private investments.

GCC’s growing role in global finance

El-Erian highlighted the growing presence of global financial institutions in the Gulf, where sovereign wealth funds, offices, pension funds, and banks actively manage and allocate capital internationally.

Over time, GCC countries have expanded their investment strategies, now playing a leading role in sectors such as artificial intelligence, life sciences, and robotics.

However, the war on Iran has caused a near “sudden stop” in the energy sector, creating short-term revenue pressures. Governments are expected to increase spending to shield populations from the impact of the war, even as some expenditures decline.

El-Erian emphasized that GCC countries are not uniform, noting that outcomes will depend on financial reserves, revenue recovery speed, and the balance between domestic spending and international investments.

He also warned that any disruption in global capital flows comes at a difficult time, with advanced economies facing large deficits and rising debt issuance, alongside major financing needs driven by technological shifts such as artificial intelligence.

The result is sustained high borrowing costs, which could affect countries, companies, and households, while amplifying financial risks and exposing new vulnerabilities.

Despite the challenges, El-Erian said the GCC will recover its energy exports and maintain its role as a global financial and logistical hub, but stressed that temporary shifts in capital flows must be considered in assessing the broader economic impact of the Iran war.

March 23, 2026 - Posted by aletho | Economics | Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE