The conflict between Saudi Arabia and the UAE is showing new signs of escalating. If current trends continue, this could raise question marks around the $3 trillion managed by the sovereign wealth funds of both countries — much of which flows to western markets.
In January 2026, a month before the war between the US and Iran broke out, we warned that the conflict between Saudi Arabia and the UAE was likely to escalate during this year. As soon as the war began, we warned that it was likely to threaten the safe haven status of the Gulf states, as a significant amount of capital was likely to leave the region permanently. A few weeks later, we reaffirmed that the risk of a financial crisis in the Gulf was growing, as the UAE requested a currency swap line with the Fed. Next, the UAE took the extraordinary step of leaving the OPEC oil cartel, as it can afford a much lower oil price than OPEC leader Saudi Arabia. In recent weeks, new signs of stress have emerged, as Saudi Arabia has reportedly blocked financial flows to the UAE.
Looking ahead, a relevant analogy is the conflict between Qatar and Saudi Arabia (backed by the UAE), which led to a blockade of Qatar in 2017. It severely depressed foreign direct investment into the country for years — and a similar, but far larger, financial shock could follow if the conflict between Saudi Arabia and the UAE continues to escalate.
