Oil-rich Gulf countries face both benefits and problems when tariffs hit

Dubai, United Arab Emirates – The wealthy Arab Gulf countries are in a better position than many other parts of the world to manage the economic impact of President Donald Trump’s tariffs, economists and regional investors. However, the uncertain outlook for oil prices could put budgets and spending projects in some countries at risk.

Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Oman and Qatar constitute the Gulf Cooperation Council. Together they make up about $3.2 trillion in sovereign assets, accounting for 33% of sovereign assets worldwide, according to GCC Executive Director Jasem Mohamed Albudaiwi.

The GCC holds around 32.6% of its global proven crude oil reserves, according to the Gulf Cooperation Council Statistics Centre.

Trump has long pushed OPEC, the Saudi-led oil producers alliance, and has long pushed to lower US oil prices and pump oil to offset inflation, making him vulnerable to the assets and policies of the Trump administration.

However, lower oil prices could have a significant impact on budget deficits and spending plans in countries that rely on economies that rely heavily on hydrocarbon revenues despite diversification efforts.

BlackRock’s leading investment strategist in the Asia-Pacific region and Abu Dhabi-based Middle Eastern Ben Powell said his warm ties with Trump will bolster his hands in terms of potential tariff negotiations. Some GCC countries are also expanding their role in global diplomacy. One example was holding peace negotiations in Riyadh to end the Russian-Ukurein war, which made this even more important to Washington.

“I think the Middle East is fine because they have a deep connection with the US that they have,” Powell told CNBC’s “Access Middle East” on Monday.

“I think we’ll all be swept away by the pandemic in the next short period. That’s inevitable. But the Middle East, with the strength of the balance sheet they have, with the energy they still have, and for me, perhaps not today, but with that time, when that Mikir said, and with that time.

Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the US is not the main Gulf export market, considering what the direct impact of tariffs is.

“The GCC should be in a relatively advantageous position to withstand headwinds, especially the UAE,” she wrote in a bank’s report on Friday.

The region faces 10% universal tariffs on blankets and previously imposed on all foreign steel and aluminum (products exported by the UAE and Bahrain), but “we expect the direct impact to be relatively restrained as the US is not a significant destination for Gulf exports.

However, oil price outlook is important for Gulf countries’ budgets and future spending plans. Part of its vision for 2030, especially for Saudi Arabia, they embarked on an ambitious megaproject worth trillions of dollars. The success of the plan is likely ironically dependent on oil revenues.

Global Benchmark Brent Crude Oil It traded at 8:30am on Wednesday in London at $61.44 per barrel on Wednesday, falling almost 17% since the start of the year. Additional pressure has been placed on prices after OPEC+, a Saudi Arabia-Russia-Russia alliance of oil producers, took the surprising decision to accelerate planned oil production hikes and further strengthen global supply.

Saudi Arabia needs oil at more than $90 a barrel to balance its budget, the International Finance estimates are estimated. This week, Goldman Sachs cut its 2026 oil price forecast by $58 on Brent and $55 on US benchmark WTI crude. This is a low move from Brent’s forecast of $62 last Friday and $59 for WTI in 2026.

“With weak global demand and greater supply, we will add negative side risk to our 2025 Brent forecasts, but we will wait for market clarity before making any changes,” ADCB’s Malik told CNBC on Monday. OPEC+ is aiming to raise oil production levels again in May, and she predicts that the group will suspend its plans if the crude prices stay where they are or fall further.

“Our biggest concern is the sudden and sustained decline in oil prices, which will require a reassessment of spending plans (including CAPEX) (government and non-budget), which could also affect liquidity and broader confidence in the banking sector,” warned Malik.