Hundreds of delegates from the Gulf are set to descend on Miami this week for Saudi Arabia's Future Investment Initiative summit as the Iran war tests investment appetite in the kingdom and the broader region.
The gathering of investors comes as the US-Israel war on Iran escalates, already having struck Gulf economies and global markets, forcing regional investors to recalibrate their economic visions and investment outlooks. Economists have already highlighted the war's dire consequences for energy supplies and the increasing brunt of the economic damage being borne in the Gulf.
The fourth edition of the Future Investment Initiative’s priority summit in Miami aims to maintain the momentum of capital to the US under the banner “Capital in motion”, with Latin America as a growing centre of capital deployment.
FII Institute chief executive Richard Attias acknowledged that while this year’s event is not “business as usual”, he remains bullish on Saudi investment.
“Uncertainty is the new norm for years. And I think CEOs now are extremely well equipped, and they've got the experience of how to navigate in uncertainty,” he said.
FII chief executive
Mr Attias said FII members have “some concerns” because some investment will need to be reallocated, although he said the mood remains positive.
“They need some time to see how they will make a pause for one month, two months, because no one knows when the conflict will end.
“But, frankly speaking, people are extremely positive and confident … that the impact that we're seeing today will be corrected in the near future,” he said.
Economic toll from war
The effective closure of the Strait of Hormuz has jolted energy markets, while Iranian attacks on key energy sites could bite into the Gulf’s economic output.
“The first question is the duration of hostilities and the closure,” said Karen Young, a senior research scholar at the Columbia University Centre on Global Energy Policy.
“The longer it goes, the more of a hit that takes to government revenue and non-oil GDP. It could be really bad,” she said.
senior analyst at RANE Network
The International Monetary Fund expects the war to weaken growth in the Gulf, although higher energy prices could offset some of the shock. And some countries’ diversification efforts could act as shock absorbers.
Goldman Sachs analysts in a recent briefing said Saudi Arabia's gross domestic product could contract by 5 per cent if the conflict runs through April, while the UAE's would shrink by 3 per cent. Kuwait and Qatar's economies would plunge 14 per cent under this situation, analysts wrote.
“I think this is the worst economic crisis that they could be facing, potentially ever,” said Ryan Bohl, senior Middle East and North Africa analyst at RANE (Risk Assistance Network and Exchange).
Mr Bohl said priorities for governments in the Gulf could be turning those investments inward to support their own economic models that have been affected by the conflict.
“Broadly speaking, they're going to be pulling some back or extending out the time frame from which the pledges might actually be followed through on,” he said.
Some countries in the region have said the war will not disrupt their investment goals. They have cited Covid-19 and the Russia-Ukraine war as previous situations they have adapted to.
On Thursday, the UAE's Minister of State and Ambassador to the US reiterated the country's commitment to a $1.4 trillion total investment pledge made last year.
“The UAE remains open for business, committed to our shared priorities and confident in our ability to navigate this period successfully,” minister Yousef Al Otaiba wrote in a letter to the US-UAE Business Council.
US relationship
Gulf countries have made some of the largest investment pledges in the US since President Donald Trump returned to office last year. Data compiled by the Peterson Institute for International Economics showed Gulf states accounted for $4 trillion of the $5 trillion investment pledges made by foreign governments since last January.
However, the report also questioned how implementable these investment pledges will be.
“Implementation could fall largely on sovereign wealth funds, which have typically made commitments to boost US spending as part of broader diplomatic efforts to engage the United States,” the policy brief’s co-authors Gregor Auclair and Adnan Mazarei wrote.
FII Priority Miami is the latest stop in the economic relationship between the US and Saudi Arabia.
“It's moving forward,” Mr Attias said of the US-Saudi economic relationship.
Mr Trump's Middle East envoy Steve Witkoff and son-in-law Jared Kushner are both slated to attend the summit, as is White House adviser Massoud Boulos.
Mr Trump is due to close out the event with an address on Friday.
The US leader touted America's ties with the kingdom during his landmark visit to the Gulf last May, while Saudi Crown Prince Mohammed bin Salman visited the White House in November to deepen security and economic ties between the two countries.
Mr Trump at the time said more than $270 billion in agreements were struck between Saudi and US companies that week across defence, media, advanced technologies and critical minerals.
“I don't see at all a pause for that,” Mr Attias said.
