Gulf states may shift $4 trillion from US to domestic spending amid Iran war, PIIE says

September 14, 2026 at 07:34 PM2 min

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Saudi Arabia, Qatar and the UAE may prioritize domestic investment over nearly $4 trillion in US commitments as the Iran war strains their fiscal positions, the Peterson Institute for International Economics said Monday. The IMF cut 2026 growth forecasts for the three Gulf states by up to 14.7 percentage points, far exceeding the global reduction of 0.3 points. The shift could trigger US tariff pressure, as Trump already threatened South Korea in January 2026 over delayed investment.

Key Facts

The Peterson Institute for International Economics released a 15-page report on Monday analyzing the impact of the US-Iran war on Gulf investment commitments.
The IMF cut Qatar's 2026 growth forecast by 14.7 percentage points to 8.6 percent.
Saudi Arabia's Public Investment Fund reduced its international investment share from 30 percent in 2020 to 20 percent over the last six years.
In January 2026, Trump threatened to raise tariffs on South Korean goods over delays in enacting its US investment agreement.

Fiscal Pressure

The war has weakened the Gulf states' fiscal positions and economic prospects, with lasting effects on their growth models. The IMF cut its 2026 global growth forecast by 0.3 percentage points, but reductions for Gulf states were much larger. Saudi Arabia's forecast was cut from 4.5 percent to 1.7 percent, and the UAE's from 5.6 percent to 1.7 percent. Gulf governments have enough financial assets and borrowing capacity to avoid an immediate funding crisis.

Investment Shift

Saudi Arabia had already begun rebalancing toward domestic investment before the war, and the conflict reinforced that shift. Saudi Arabia's Public Investment Fund reduced its international investment share by 10 percentage points over six years. The report warns that delays in fulfilling investment commitments could lead to additional pressure from the White House. The Trump administration has already shown limited patience with delays by other partners.