War in Iran: the hidden risk for the USA and the Gulf funds

The War in Iran and the Economic Risk for the United States: The Hidden Threat to Gulf Capital Flows

Economic concerns regarding the effects of the [war in Iran](https://www.cfr.org/topics/iran-war-analysis-and-updates) have primarily focused on the flow and availability of critical materials globally. However, there is another, less appreciated risk related to the war for the United States: the supply of dollars from the Gulf, especially for U.S. technology companies and their financial intermediaries.

The Rise of GCC Sovereign Funds

Over the past decade, the economies of the Gulf Cooperation Council (GCC) — which include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) — have significantly transformed their sovereign wealth funds (SWF) as part of efforts to diversify their economies from the volatile cycles of energy prices. Today, the region hosts some of the world’s largest SWFs, with about a dozen sovereign funds (led by Saudi Arabia and the UAE) managing between [4](https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025174-source-pdf.pdf) and [6 trillion dollars](https://globalswf.com/ranking) in assets, according to estimates from SWF trackers and the International Monetary Fund. Just last year, the region’s sovereign funds invested more than $120 billion, with the United States as the primary beneficiary. This transformation has included a greater focus on illiquid foreign private investments, especially in the United States, as well as more cross-border business to help develop non-energy industries at home. Indeed, Gulf financial and technology conferences have become highlights of the annual travel calendar for the world’s largest institutional investors, similar to Davos in Switzerland or Milken in Los Angeles. Both sides have been eager to increase cross-border and profitable relationships.

Current Challenges

However, GCC budgets are now under pressure: the war has largely disrupted energy exports and drastically slowed other sources of income, such as tourism. At the same time, domestic capital needs have increased, including greater spending on defense and infrastructure reconstruction that absorb a significant portion of available resources.

Implications for U.S. Technology Companies

U.S. technology companies, particularly those operating in the artificial intelligence sector, are among the most exposed to this risk. Many of these companies have relied on investments from Gulf sovereign wealth funds to finance their growth and innovation. A reduction in these capital flows could force companies to turn to alternative funding sources, such as debt.

The Ripple Effect for Financial Intermediaries

Financial intermediaries that facilitate these capital flows could also be affected by the situation. Many of these intermediaries are already facing challenges in maintaining and attracting diverse client segments. A reduction in Gulf investments could further decrease their commissions and profits.

An Underestimated Risk

This situation creates an underestimated risk for U.S. financial markets, particularly those heavily oriented toward technology. At a time when the S&P 500 is near all-time highs and anxiety about the state of the U.S. economy is high, a reduction in Gulf investments could have a significant impact.

Direct Investments in U.S. Technology Companies

The region’s sovereign funds have also made direct investments in U.S. technology companies. The PIF’s acquisition of Electronic Arts for nearly $29 billion was a notable example, but there were several other significant direct deals last year, including investments by [MGX](https://www.fwdstart.me/p/musk-xai-raises-20b-series-e-as-qatar-investment-authority-and-mgx-are-key-players) (a Qatar sovereign fund) in Musk’s XAI. Additionally, GCC sovereign funds have invested in technology infrastructure and startups, contributing to the growth of the U.S. tech sector.

Impact on Technology and Innovation

GCC investments in the United States have had a significant impact on the technology sector and innovation. They have provided capital for the development of new technologies, job creation, and startup growth. However, the war in Iran and its economic repercussions could disrupt these capital flows, creating challenges for U.S. technology companies that depend on these investments. As the world continues to monitor developments in the war in Iran, it is essential to recognize the broader impact on capital flows and the global economy. The hidden threat to Gulf capital flows represents a significant risk for the United States, particularly for its rapidly growing technology sector. As the situation evolves, it will be crucial for the United States and its international partners to work together to mitigate these risks and ensure economic stability.