The Riyalpolitik 5
The Riyalpolitik 5 highlights five recent geo-economic developments across the Middle East that we’re keeping an eye on.
One Big Deal: Syria Opens to Emirati Capital
The UAE and Syria held their first bilateral investment forum since Assad’s fall, with UAE Minister of State for Foreign Trade Thani Al Zeyoudi announcing that non-oil bilateral trade reached a record $1.4 billion in 2025 — up 132% year over year — as a large Emirati delegation descended on Damascus with an agenda that went well beyond symbolism.
Why we care: The deal flow from the two-day forum was substantial and concrete. Emaar founder Mohamed Alabbar announced his company is studying projects in Damascus worth up to $12 billion and on Syria’s coast worth up to $7 billion. DP World has already signed a 30-year concession to manage and modernize the Port of Tartous for $800 million. Sharjah’s Dana Gas signed a preliminary deal with the Syrian Petroleum Company to redevelop gasfields near Homs. And Etihad Airways, Abu Dhabi’s flagship carrier, is planning to resume Abu Dhabi-Damascus flights in mid-June, a first since 2012.
The UAE’s engagement with Syria has been more cautious than Saudi Arabia’s or Qatar’s, in part because of Abu Dhabi’s longstanding wariness toward Islamist-linked governance. What has changed is the war: Syrian President al-Sharaa was among the first regional leaders to express solidarity with the UAE after Iranian strikes, and Abu Dhabi is competing on reconstruction with Riyadh and Doha. The corridor logic visible in the Ottoman-era Hejaz Railway connecting Syria to the Gulf is now extending to ports, real estate, energy, aviation, and fiber optic cable networks. The UAE is not just investing in Syria; it is positioning itself as a primary economic gateway for Syria to the Gulf. With $216 billion in reconstruction needs and a country that was the Mediterranean’s only significant crude producer before the civil war, whoever gets in early gets the premium. Abu Dhabi has decided it intends to.
One Policy Shift: Saudi Arabia’s Sovereign Wealth Fund Pivots
Saudi Arabia’s $925 billion sovereign wealth fund, the Public Investment Fund (PIF), announced a new 5-year strategy that commits a greater share of capital domestically, scales back the Kingdom’s giga-projects, and prioritizes a more disciplined, capital-efficient approach to investment.
Why we care: For years, the Gulf’s sovereign wealth funds (SWFs) were the global economy’s most reliable source of patient, large-scale capital. The SWFs anchored Silicon Valley start-ups’ growth, wrote big checks for AI data centers that no private fund could match, and in recent years, Riyadh, Abu Dhabi, and Doha have become the first port of call for many US investment firms seeking capital. Saudi Arabia, the UAE, and Qatar collectively manage nearly $3.5 trillion and have committed billions to the US economy, including data centers inside the US.
But even before the Iran war, there was fiscal pressure on Saudi whose balance sheet couldn’t keep up with its Vision 2030 growth ambitions, given relatively low oil prices and massive spending domestically. The war with Iran has only intensified that pressure. Energy and civilian infrastructure in Qatar and the UAE has also been badly damaged. Qatar’s major gas processing facility Ras Laffan lost 17 percent of LNG capacity and with it billions of dollars in revenue. Iran’s blockade of the Strait of Hormuz has severely curtailed the export of Gulf oil and gas.
The war’s end does not appear imminent, but investors and companies are already looking for hints at the Gulf SWFs’ next steps. For years, global investors operated under the assumption that Gulf capital was effectively unlimited. The new PIF strategy suggests a more selective, commercially driven, and disciplined approach ahead, focused on projects tied directly to Saudi Arabia’s economic transformation (i.e. tourism, industrial development, mining, and AI infrastructure). Giga-projects are being scaled back across the board, from NEOM, the futuristic desert city, to LIV Golf, the Saudi-created pro tour. At the same time, Riyadh appears intent on levering its sovereign capital to strategically attract private investment into the Kingdom. As we’ve said before, the flow of capital into and out of the region often tells a much deeper story than the headlines. Where and how SWFs deploy (and withdraw) capital can reveal a lot about the Gulf’s strategies, policies, and partnerships. This is a dynamic we’ll continue watching closely.
One Source of Friction: No Clear Off Ramp to Iran War
The US and Iran continue to negotiate an end to the conflict with few anticipating a clean off-ramp.
Why we care: Despite the public choreography around ceasefire talks, there are still few expectations of a meaningful breakthrough in the near-term. Hormuz remains effectively closed, keeping pressure on energy and shipping. Much of the public signaling, including President Trump’s threats, pauses, and reports of canceled strikes, increasingly looks like negotiating theater designed to shape leverage and market dynamics rather than evidence of imminent de-escalation. Behind closed doors, the two sides still appear far apart, with Iran reportedly seeking major economic concessions and guarantees beyond even what it secured under the 2015 JCPOA. At the same time, Trump’s recent visit to China did not produce meaningful Chinese commitments to pressure or restrict ties with Iran. Meanwhile, the risk of spoilers remains high, including the possibility of IRGC-linked proxy or external attacks designed to widen the conflict or derail diplomacy altogether. Increasingly, this looks less like a traditional ceasefire negotiation and more like a contest over who can better tolerate prolonged instability and impose economic and political pressure on the other side.
One Under the Radar: Iraq Might Be the War’s Most Complicated Casualty
Iraq’s new US-backed Prime Minister Ali al-Zaidi was sworn in days ago, pledging to restrict weapons to state forces, a direct response to US demands that he keep Iran-linked Shia militia figures out of his cabinet and begin disarming groups that have long operated as a state within the state. Washington has made the stakes explicit: it has threatened to curb the cash dollar oil proceeds sent to Baghdad if Zaidi fails to deliver.
Why we care: Al-Zaidi’s task may be structurally impossible, and the events of the past week illustrate exactly why. Saudi Arabia intercepted and destroyed three drones that entered its airspace from Iraqi territory, prompting the GCC Secretary General to condemn the attack as a “flagrant violation of security and stability in the region,” with Riyadh reserving the right to respond at the time and place of its choosing. It was not the first time: Saudi Arabia summoned the Iraqi ambassador weeks earlier over similar incidents. No Iraqi faction claimed the drones, and Baghdad has not commented. The new government is being tested on its most important relationship — Gulf investment and economic integration — before it has even formed a full cabinet.
Al-Zaidi is governing a country whose territory is being actively contested by external actors while his oil revenues are curtailed by a closed Hormuz and his political coalition includes the very Iran-backed factions Washington is demanding he dismantle. As Chatham House’s Renad Mansour told the FT, disarming the militias would be “impossible” without risking civil war. What Zaidi will most likely deliver is theatrical compliance: symbolic sackings, a few court cases, enough optics to keep the dollar flows intact. Whether Washington accepts that (and whether Gulf states accept an Iraq that cannot control its own airspace) will be an important early test for Baghdad, and a consequential one for the durability of the post-war regional order.
One Fun Thing: Eight Arab Teams, One World Cup, Zero Ceasefires Required
A record eight (!) Arab nations (Algeria, Egypt, Iraq, Jordan, Morocco, Qatar, Saudi Arabia, and Tunisia) will compete at the FIFA World Cup 2026, kicking off June 11 in the United States, Mexico, and Canada. It is the largest Arab presence in the tournament’s history, and the region is paying attention.
Why we care: A month out from kick-off, the Gulf has something other than war to argue about — and the arguments are already lively. Saudi Arabia, whose stunning upset of eventual champion Argentina in Qatar 2022 remains one of the tournament’s most memorable moments in recent memory, arrives with genuine expectations. Morocco, which became the first African and Arab nation to reach a World Cup semifinal in 2022, returns as the standard-bearer for what Arab teams can achieve on the global stage. For Gulf governments managing war fatigue, economic disruption, and fiscal tightening, the World Cup is a rare source of unambiguous regional pride arriving at precisely the right moment. (For its part, Iran has also qualified for the tournament and intends to play, but its participation remains pending visa and security concerns, with no US visas yet issued to Iranian players or staff and FIFA in active crisis talks with the Iranian Football Federation.)
The tournament also carries a longer arc. Qatar’s 2022 hosting rewrote the global conversation about the Middle East. Saudi Arabia will host the 2034 edition, and the kingdom’s ambitions have only deepened since: the Saudi Pro League has attracted world-class talent, and the national team’s performance in 2026 will be watched in Riyadh as both a sporting and a reputational event. In living rooms from Rabat to Cairo to Baghdad, the group-stage draw is generating more heat than the ceasefire negotiations. For a region that has spent the past 10+ weeks defined by pain, frustration, and destruction, a month of the beautiful game is a reminder of what is worth rooting for.