GCC Sovereign Wealth Funds: Rainy Day Account or Economic Pressure Tool?

The world’s first sovereign wealth fund, the Kuwait Investment Authority (KIA), was established in 1953 to invest the state’s income from natural resources in a range of assets and funds around the world. The KIA’s mandate is fairly straightforward: diversify beyond oil and generate sustainable returns for the country’s future generations. The concept of a state-operated investment arm isn’t novel anymore, with north of a hundred SWFs around the world managing approximately $15.8 trillion in assets (per Global SWF). Roughly 40% of that is concentrated in the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates).

These funds have made it a priority to foster economic cooperation between the Middle East and the West, invest in innovative businesses, and serve as capital partners for the world’s leading visionaries. The events that took place on February 28, 2026 and the subsequent targeting of the GCC might impact that calculus. In the aftermath of the attacks on Iran, the regime decided to retaliate by indiscriminately targeting civilian hotspots, critical infrastructure, and energy production facilities across the entire Gulf region with drones and missiles. As of March 26, 2026, Iran fired approximately 1400 missiles and 3000 drones at the six GCC nations, with the Gulf maintaining a defensive stance and choosing patience and restraint so as to not flame the fires. As Iran continues to lash out and attack the countries that lobbied hard to prevent a war in the first place, what path could the GCC take in the coming weeks to protect their interests?

In this article, I’ll speak to one main vector: economic tools and channels. 

Liquidity

Iran has chosen to set the whole region ablaze by specifically targeting key energy infrastructure such as Qatar’s Ras Laffan LNG terminal and Kuwait’s Mina al-Ahmadi and Mina Abdullah refineries. They also decided to cripple a key international trade route by blocking the Strait of Hormuz. What happens when you attack energy production sites and close down the point at which this energy is exported to the rest of the world? Well, losses pile up and missed revenue starts to accumulate. At some point, the opportunity cost will be too large and the GCC will need liquidity to cover key expenses and rebuild. Dipping into the holdings of their wealth funds is one way to provide this liquidity. In a sense, these funds were built and grown over the years to serve as a rainy day account for liquidity crunches. I, for one, never imagined that the rain in question would be missiles and drones.

De-Risking

Roughly 20% of the world’s oil and LNG passes through the Strait of Hormuz, making it the world’s most critical chokepoint. Blocking such an important artery is causing a global energy crisis that some experts believe will be one of the largest in history. A supply shock means more expensive oil and gas, and increasing energy prices will have an inflationary effect on everything from the gas we pump in our cars to the fertilizers that are used to grow the produce we eat. As input costs go up, margins compress and corporate profits start declining. All of a sudden exposure to equities is riskier than it was a few months back, and investors need to reassess their holdings and rebalance their portfolios in response. Gulf SWFs, who own trillions in American and European equities, might decide to take some chips off the table if they believe a global recession is to come from the energy crisis that’s currently underway.

Pressure and Influence

The last and least likely route the GCC could take is using their large state-owned funds to place economic pressure on the United States to find a quick and lasting offramp to this conflict. Since early 2025, Saudi Arabia, Qatar, and the UAE have pledged up to $4 trillion (with a T) in investments in the US, with a focus on technology, AI, and defense. The aim is to further strengthen US–GCC economic cooperation, a cornerstone of the region’s allyship with the United States dating back decades. The GCC might decide to halt certain projects and redirect capital flow if their voices aren’t being heard and their security and interests aren’t being considered. Due to the deep ties connecting the Gulf and the United States and the long-term nature of most of these investments, my belief is that this option has a very low probability.

The events currently unfolding in the Middle East will have massive ripple effects on the global economy and will leave a lasting imprint for years to come. The role the GCC is playing today is that of a shock absorber and diplomatic mediator. Despite daily attacks on all six countries for more than three weeks at this point, patience and restraint prevail. The question is how much longer will this be their key strategy, and what tools will they use to de-escalate and mitigate losses?

Mohammad Almejel (MBA ’26) was born and raised in Kuwait. He studied structural engineering at the University of California, San Diego, and earned a master’s degree in civil engineering from Columbia University. Prior to HBS, Mohammad was the Co-Founder and Director of Operations at Fiz, a quick-commerce startup based in Kuwait.