While Its Overseas Investments Are Being Reviewed, High Oil Prices & U.S. War Can Trigger Long-Term Recession In Saudi Arabia. Even With $1 Trillion Fund, It Nears $400B Of Debt. Qatar Will Follow Them On Ellison’s WarnerDiscovery Pursuit, Which Can Change If Conflict Escalation Brings Uncertainty.
by lowell2017
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“Vast development sites around Riyadh trumpet images of a shiny new future for Saudi Arabia—part of Crown Prince Mohammed bin Salman’s grandiose Vision 2030 agenda to turn the petrostate into an international hub of trade, technology and culture.
Appeals for investment are sprinkled on ubiquitous construction fencing, along with English-language catchphrases such as “redefining livability” and “an extraordinary new normal.” Mohammed’s vision extended to a pledge to invest up to $1 trillion in the U.S. during a landmark visit to the White House in November, earning him praise from President Trump. The warm embrace was a signal that the de facto Saudi leader, once shunned in the West, was fully rehabilitated on the world stage.
Yet those extraordinary plans are slamming into reality. Over the past year, the world’s largest oil exporter began pulling back on many of its promised projects and investments, met with budget shortfalls and unrealistic designs. And now the U.S. and Israeli war with Iran has plunged Mohammed’s sweeping vision deeper into jeopardy.
Iran’s closure of the Strait of Hormuz has limited Saudi oil exports to about half their normal capacity. The kingdom has shut down most of its offshore fields and this week stopped operating one of the world’s largest petrochemical plants.
Hundreds of Iranian drones and ballistic missiles launched at Saudi Arabia have hurt its image as a safe place for investors and visitors, even though most were intercepted. Major events have been canceled, including an F1 race, a capital markets forum and a flag football event featuring Tom Brady. Virgin Atlantic discontinued daily service to Riyadh, which it launched only a year ago. On Thursday, major U.S. companies operating in Riyadh told their staff to work from home for the next few days and some large office towers and business parks, including the King Abdullah Financial District, temporarily closed following Iranian threats against U.S. firms.
The war has already cost Saudi Arabia more than $10 billion in lost revenues and expenses, people familiar with the matter say. The Saudi government didn’t respond to requests for comment.
Nearly every mega-project unveiled as part of Vision 2030 is now under review, a process that predates the war, people familiar with the matter say. Officials are also reconsidering the size of U.S. investments pledged last year, the people said.
At Neom, the planned futuristic city that called for two 1,600-foot skyscrapers running 106 miles, officials had already been quietly ratcheting back plans, leaving a gaping 75-mile trench across the desert. Neom recently canceled major construction contracts at a $38 billion luxury mountain project, meant to be the first outdoor ski resort in the Gulf. Coming after years of work, it raises the prospect that enormous partially-built structures, including a $5 billion dam that was 30% finished, will be simply abandoned. Neom didn’t respond to requests for comment.
In Riyadh, construction crews in recent months parked their backhoes at a quarter-mile-wide pit where the world’s largest building—a gargantuan cube that could hold 20 Empire State Buildings—was supposed to be built.
The $1 trillion Saudi sovereign-wealth fund, the Public Investment Fund, yanked back spending and hiring in numerous areas and sold much of its U.S. stock portfolio, even before the war. In December, PIF pleaded with wealthy families, fund managers and local businesses to pump more money into Saudi projects, people familiar with the matter said. Government departments were told to tighten their belts, reduce travel and stay in cheaper hotels abroad.
PIF governor Yasir Al-Rumayyan said at a conference in Miami at the end of March that “The Saudi macroeconomic position remains strong, stable and resilient. And PIF’s portfolio is well diversified and structurally resilient. We are a long-term, patient investor.”
Even if a cease-fire is eventually reached, Saudi officials worry the eventual outcome will be an Iran that’s wounded yet still dominated by a hard-line regime that controls the Strait of Hormuz. That could leave Saudi Arabia under a cloud of uncertainty, potentially for years to come, repelling foreign investors it has increasingly been counting on for its transformation.
It would also likely force Riyadh to spend billions of dollars to bolster defenses and bail out already-limping projects, further straining a budget that’s faced growing deficits.
“Everything’s now up in the air,” Chris Johnson, an American lawyer based in Riyadh who helps foreign companies doing business there, said four weeks into the war.”
Despite the WSJ article on the equity agreement potentially signed by the wealth funds tomorrow, Qatar’s merely following Saudi Arabia’s actions and that could change if needed:
“Gulf sovereign wealth funds are undertaking a sweeping review of American investments, driven by a combination of commercial necessity and political recalibration driven by the Iran war, according to sources familiar with deliberations around the high-level financing deals.
In particular, the planned merger between Paramount Skydance and Warner Brothers Discovery, made possible as a result of Gulf financing, is getting a new look. A postponed meeting of the board of the Qatar Investment Authority will reconvene within the next week as the fund recalibrates its investment approach, a source with knowledge of the deliberations said. “Even from a purely, purely numbers perspective, you have to look at this again,” said the industry source, asking for anonymity to speak freely about investment matters rarely discussed publicly.
No announcement from the meeting is expected, the source said, as the Qataris are unwilling to unilaterally back out of the deal without Saudi Arabia also doing so. Withdrawing from the deal would be seen as a political shot against both Israel and the United States, which Qatar feels it can not undertake alone under the current circumstances.
The merger between the two media conglomerates was announced on February 27, 2026. The next day, the U.S. and Israel launched a surprise attack on Iran, which responded, as promised, by attacking Gulf countries hosting U.S. bases. Those same Gulf countries are the primary financial backers of the merger, according to documents on file with the Securities and Exchange Commission. Wealth funds connected to Saudi Arabia, Qatar, and the United Arab Emirates pledged $24 billion to back the deal, which cost nearly $111 billion.
Under the current scenario, the Paramount deal remains likely to go through, but that could change if the war goes on for another month or longer and Gulf oil and gas assets come under even greater attack. Trump has turned his attention to Iran’s oil infrastructure, and Iran has pledged to retaliate by targeting Gulf oil and gas assets in response. Yet even the current circumstances are forcing a deeper look at the entire suite of deals in the sovereign wealth funds’ portfolios. A Paramount spokesperson declined to comment. Spokespersons for the Public Investment Fund (Kingdom of Saudi Arabia), L’imad Holding Company PJSC (UAE), and Qatar Investment Authority (Qatar) did not respond to requests for comment.
Ultimately, even if QIA’s preference in the end is to exit the deal, the fund will stay in unless Saudi also departs.“It’s not a Qatar decision. It’s not a Saudi-UAE decision. It’s a Saudi decision, because all three countries have to commit for the deal to make sense, unless you can find other investors from Asia,” the industry source said. Chinese wealth fund Tencent had previously been involved, but dropped out so that the transaction would not have to undergo U.S. federal scrutiny on national security grounds.
The most likely outcome of the upcoming meeting, the industry insider said, will be for the fund to continue a wait-and-see approach, knowing the political and economic situations are rapidly evolving. “If Saudi goes in, Qatar will follow. If Saudi doesn’t go in, Qatar won’t follow, they’ll just delay, delay, delay, and see what happens. Everyone can still say, ‘No, no, we’re committed, we’re committed.’ And there’s a million ways, if this continues another month, you could force majeure, you could do whatever.”
A Qatari source with insight into the process also said that the deal was still heavily likely to go through.
Trump’s decision to humiliate MBS publicly has thrown a wrench into the relationship with Saudi Arabia. At a Saudi-backed investment conference, Trump riffed on his relationship with the crown prince. “A short time ago we were together and he looked at me and he said, ‘You know, one year ago you were a dead country. Now, you’re the hottest country anywhere in the world,” Trump said. “He didn’t think this was going to happen. He didn’t think he’d be kissing my ass, he really didn’t. He thought it’d be just another American president that was a loser with a country that was going downhill, but now he has to be nice to me. You tell him he better be nice to me, he’s gotta be.”
The insult has contributed to the air of uncertainty surrounding the Paramount financing, the industry source said. “Look, that thing that happened a couple days ago is not a small thing. I mean, we know MBS. That was a pretty insulting move. I don’t know if the word’s ‘petty,’ but he’d be willing to move drastically based on emotions,” he said.
He said that most in the industry were still stuck in a fog-of-war scenario and hadn’t gamed out longterm scenarios. Trump, he said, didn’t seem to have thought things through either, particularly as it related to the president’s promise to supply Europe energy. “The knock on effects are tremendous, because who will supply the LNG and the gas to Europe the next few years? It’s the U.S. But who also needs that gas to grow the data centers? It’s the U.S. So something has to give.” Access to helium, an essential component for the AI industry, is also at risk as a result of the war.
The major players—China, Russia, and even Saudi Arabia—are all incentivized to keep it going, he said.
Saudi Arabia is “not as affected by this war as people may think, their spot prices went up, they, logistically, they’re the hub for everything now,” he said. “It’s making up the difference.”
“If you think about who’s really incentivized to deescalate right now, not many. Iran’s happy for this to continue. Israel’s happy for it to continue. U.S. doesn’t seem to care. It doesn’t affect them. And you have China, China maybe doesn’t want it but Russia is benefitting like more than anybody. So it’s really Qatar that needs to just deescalate for their own security. Kuwait’s fucked. Bahrain’s fucked, but they’re not really players.””
https://www.dropsitenews.com/p/gulf-funds-recalibrating-american-investments-paramount-warner-brothers-ai