meed-logo

line1 line2 line3
SIGN IN / REGISTER

GCC shelters from the trade wars

18 April 2025

 

The ‘Liberation Day’ tariffs that US President Donald Trump announced on 2 April have plunged global markets into turmoil, with many previously bullish investors turning bearish as a large swathe of reciprocal tariffs were announced.

A week later, Trump announced a 90-day pause on the new tariff regime for most trading partners except China, which received an increased tariff rate of 145%, which was then increased to 245%.

As global stock markets suffered some of their worst days on record, for the GCC, the main mechanism of transmission of economic pain came through the negative oil price shock. Brent crude prices dropped by about 16% and dipped below $60 a barrel for the first time since 2021.

Falling prices

For TS Lombard’s general base case, the negative impact of weaker oil demand is offset by more constructive aspects, which highlight the region’s resilience as it is relatively sheltered from the direct effects of Trump’s tariffs compared to most other emerging markets.

To focus on the negatives first, oil prices have taken a significant hit, dropping to lows unseen since before the Russia-Ukraine war. 

It has been generally accepted that during the period from 2022 to February 2025, there was a $70 a barrel price floor for oil, supported by reduced Opec+ production in 2023 and 2024, coupled with geopolitical risk premium resulting from conflicts in Europe and the Middle East.

The geopolitical narrative began to untangle in 2024, and then completely unravel in 2025, as markets no longer price in any real oil shock risk. 

This story has been exacerbated in 2025 with a twofold blow in early April: Trump announced his Liberation Day tariffs, and Opec+ announced plans to raise production even further, from an increase of 114,000 barrels a day (b/d) to 411,000 b/d by May, which shocked the oil market.

It is key to note that non-oil expansion depends on crude prices to finance growth, rather than for oil’s contribution to GDP. In Saudi Arabia, for example, non-oil GDP grows at about 2% when oil is below the $60 a barrel range, versus 4.7% on average above $80 a barrel.

Low oil prices become a concern when discussing GCC government budget balances. Economic diversification and oil decoupling plans have required high levels of capital expenditure, as the region begins to brace for a future of less oil dependency – though the deadline for this remains at least 10 years away.

Although GCC markets have decoupled from oil, overall funding and spending in the GCC remains driven by oil revenues. This can be seen with the breakeven oil prices for GCC countries.

There is a wide range of fiscal breakeven points within the GCC, with states such as Bahrain and Saudi Arabia suffering the most from drops in oil revenues. Despite these variations, the outlook for oil can be summarised in four points:

  • Opec+ policy creates excess supply, coupled with weak global – and namely Chinese – demand on crude; 
  • Pricing out of geopolitical risk;
  • Tariff policy creates global uncertainty, especially in energy-intensive industries; 
  • An Opec decision on production numbers will hinge on the outcome of Trump’s visit to Saudi Arabia, Qatar and the UAE.

TS Lombard does not expect oil prices to fall much further. It would not be in Trump’s favour to depress oil prices too far, as it would result in too much pain for US shale producers. 

Trump wants lower energy inputs; a positive supply-side factor; and to showcase a win from his campaign pledges, many of which have yet to materialise. Nonetheless, the base case for oil remains bearish this year relative to the past two years, although TS Lombard is not overly negative on expectations about current price equilibrium in the $60-$70 a barrel range.

Potential upside

With markets remaining in a tumultuous state, and while questions are being asked about trade deals and the re-implementation of tariffs, it is key to note that oil, energy and various petrochemicals products have been exempt from US tariffs. 

This means that, for a volatile and demand-dependent market, oil may see some upside towards the end of this year, as markets begin to price in tariff risk and supply-side disruption.

In terms of non-oil exports from the GCC to the US, with the exception of aluminium, little has changed from pre-Liberation Day operations. 

In 2024, the US enjoyed a trade surplus with the GCC in general. For example, 91% of Saudi exports to the US in January 2025 were crude or crude-based products such as ethylene, propylene polymers, fertilisers, some plastics products, and rubber – most of which are exempt from tariffs. 

For the UAE, 80% of exports to the US were similarly exempt, including supplying the US with 8% of its total aluminium demand. Significantly, Canada and China are the main aluminium exporters to the US.

With China and Canada also being major targets for Trump, countries such as the UAE and Bahrain will maintain a competitive advantage in selling to the US market, despite facing either the 10% baseline tariff, or the specific 25% aluminium tariff. The best case scenario is that both these GCC states are able to negotiate a trade deal that could exempt or curb the negative tariff effect on their aluminium exports.

Limiting impact

Although several industries have already suffered – as petrochemicals in general has suffered because of the drop in demand and oversupply in the market – the GCC finds itself in a unique position. Its economies are geared to being market- and trade-friendly, and they have low regulatory barriers, large amounts of space and energy to engage in manufacturing-intensive activities.

Coupled with strong relations with the Trump administration, the GCC has both an economic and geopolitical opportunity to act as a global intermediary. It has already been announced that Trump’s first foreign visits will be to the region, and today major global negotiations – from ceasefires to investment mandates – take place in the GCC.

A common argument being made regarding the latest output decision by Opec+ is that it is a geopolitical ploy to appease Trump’s pursuit of lower energy prices and gain favourable negotiating positions for the GCC states. Items on this docket range from civilian nuclear and drone programmes through to the approach to Iran and the Gaza-Israel question.

Saudi Arabia’s non-oil GDP remains high, showing the resilience of the kingdom when facing economic headwinds. Specifically, the kingdom has kept up its streak of strong non-oil purchasing managers’ index performances. 

With the GCC exhibiting stable conditions as the world moves towards uncertainty and erecting trade barriers, the region’s overall competitiveness could be enhanced. This is especially true in the case of the real economy, where investments still have a mostly local rather than international reliance. 

Overall, the short-term story relates to oil – and namely to the capital flows that oil brings, which fund economic diversification expenditures in the GCC. 

Although lower oil prices are a key detractor for the region, the story is far from being all bad news. 

Improved geopolitical relations and opportunities arising from the positioning of the GCC states allows them to exploit emerging gaps in markets that were previously dominated by economies that have been targeted with tariffs.

 

https://image.digitalinsightresearch.in/uploads/NewsArticle/13720569/main.jpg

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Aramco issues tender for gas pipeline at Ras Tanura refinery

    19 June 2026

     

    Register for MEED’s 14-day trial access 

    Contractors are preparing bids for a Saudi Aramco tender involving the replacement of a pipeline that is part of the Gas Line Abqaiq – Ras Tanura (GART) transmission network.

    The GART grid transports associated gas and natural gas liquids (NGL) from the Abqaiq oil processing complex as feedstock, northwards to the Ras Tanura refinery in Saudi Arabia’s Eastern Province.

    The aim of the project is to replace the GART-22 pipeline that connects the Juaymah export terminal on the Gulf coast in the Eastern Province to the Ras Tanura refinery, to ensure reliable fuel gas supply and meet ongoing demand.

    The basic scope of work on the project is to install a new, 24-inch pipeline system that will replace the GART-22 line and the abandoned GART-24 line. It will cover a distance of 18 kilometres between Juaymah and the Ras Tanura terminal.

    The scope also includes the installation of associated scraper trap facilities (launcher and receiver), pressure control valves, motor-operated valves and gas detection and sampling systems.

    Aramco issued the tender for the project in May and has set a deadline of 30 June for contractors to submit proposals.

    The following contractors, among others, are understood to be bidding for the project:

    • ACE Pipeline Arabia
    • Combined Group Contracting Company
    • Gas Arabian Services Company
    • Max Streicher Saudi Arabia
    • National Basics Company
    • Saad Ali Alessa Group
    • Sicim
    • Sinopec Engineering Group Saudi
    • Tecton Engineering & Construction
    Ras Tanura refinery complex

    The Ras Tanura refinery is the oldest, and one of the largest, crude oil refineries in Saudi Arabia. The complex has a refining capacity of 550,000 barrels a day (b/d).

    The facility also has a 305,000 b/d NGL processing facility, a 960,000 b/d crude stabilisation facility, combined steam and gas turbine electrical power generation plants with a summer capacity of 145MW and a winter capacity of 158MW, and a combined 150-pound and 600-pound steam capacity of 6,217 million pounds an hour.

    It has 75 crude oil and products storage tanks with a combined capacity of 5.8 million barrels.

    The Ras Tanura refinery’s major facilities include a 325,000 b/d crude distillation unit, a 225,000 b/d gas condensate distillation unit, a 50,000 b/d hydrocracker and 107,000 b/d of catalytic reforming capacity.

    The facility is Aramco’s only refinery to contain a Visbreaker processing unit, which has a 60,000 b/d capacity.

    The Visbreaker reduces the quantity of residual oil produced in the distillation of crude oil and increases the yield of more valuable middle distillates, heating oil and diesel.

    The refinery complex also produces 17,000 b/d of asphalt, more than any other refinery in Saudi Arabia.

    Ras Tanura receives crude feedstock from the Abqaiq, Safaniya and Manifa oil field developments.

    Crude is typically transferred to Ras Tanura through a pipeline and can also be supplied by ship.

    Most of Ras Tanura’s production is transferred to the Dhahran bulk plant for domestic use, while some products are exported from the nearby Ras Tanura shipping terminal.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17332850/main.JPG
    Indrajit Sen
  • Bahrain opens bids for 1.2GW Sitra IWPP

    19 June 2026

    Register for MEED’s 14-day trial access 

    Two developers have submitted bids for the 1.2GW Sitra independent water and power plant (IWPP), according to details published by Bahrain’s Tender Board.

    The offers were made by Abu Dhabi National Energy Company (Taqa) and Saudi Arabia's Acwa. The technical element of the bid was opened on 18 June.

    The Sitra IWPP is a combined-cycle gas turbine plant and is expected to have a generation capacity of about 1,200MW of electricity. The project’s seawater reverse osmosis desalination facility will have a production capacity of 30 million imperial gallons a day. 

    The build, own and operate project is being procured by Bahrain’s Electricity & Water Authority (EWA) under a public-private partnership framework for 20-25 years.

    According to a source, "evaluation will be done on technical bids and put up to a tender board for approval".

    Financials will be opened only after the technical element has been approved.

    Other major IWPP projects in the region have also recorded relatively low bidder particpation in recent weeks, reflecting the level of investment required for such projects.

    Earlier this month, MEED reported that just two bids had been received for the first phase of Kuwait’s Al-Khairan IWPP project.

    Three consortiums and two individual companies had previously prequalified to participate in the tender.

    In 2024, Bahrian's EWA received statements of qualifications from nine firms interested in bidding for the Sitra IWPP. Seven international companies and consortiums were then prequalified to bid last year.

    Sitra grid works

    Meanwhile, firms are still awaiting awards for two separate contracts related to the establishment of new Sitra 400kV grid substations.

    The first contract involves transformer and reactor works for the establishment of the substations.

    Switzerland-headquartered Hitachi Energy submitted the lowest bid of BD17.8m ($47.1m). Germany’s Siemens Energy submitted an offer of BD23.9m ($63.2m).

    The second contract involves 400kV and 220kV feeder cable works for the same Sitra 400kV grid substations. Three South Korean companies previously bid for the contract.

    Bids for both contracts were opened in March.

    In September, Siemens Energy won a contract worth BD48.1m ($127m) to build a 400kV transmission substation in Sitra to provide the transmission link for the planned Sitra IWPP.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17329853/main.jpg
    Mark Dowdall
  • Jordan starts international stadium construction works

    18 June 2026

    Register for MEED’s 14-day trial access 

    Jordan has started preliminary excavation and site preparation work at its Al-Hussein Bin Abdullah II International Stadium, located east of the capital city of Amman.

    The project is part of the first phase of the Amra City development master plan.

    The development is being implemented by Jordan Cities & Facilities Development Company, a Jordan Investment Fund-owned company.

    The main works are expected to begin early next year, with the stadium slated for completion in 2029.

    The project will cover an area of about 1 million square metres and the stadium will have a capacity of 50,000 spectators.

    The stadium is being built within the Amra City development, which is located about 40 kilometres (km) from downtown Amman and 35km from Zarqa City and Queen Alia International airport.

    The project forms part of Jordan's Economic Modernisation Vision (EMV) 2023-25.

    The EMV – Amman’s flagship reform programme – aims to increase real income per capita by an average of 3% annually, create 1 million jobs, and more than double the country’s GDP over the next decade.

    The strategy envisages a leading role for the private sector, which is expected to account for 73% of the estimated $58.8bn investment required.

    To achieve these targets, a substantial pipeline of public-private partnership (PPP) projects is planned in sectors including water desalination, school construction, clean energy, green hydrogen, transport and road infrastructure.

    Last year, the PPP unit at the Investment Ministry said it was targeting seven key PPP projects in 2025.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17325757/main.png
    Yasir Iqbal
  • Chinese firms win $506m Saudi housing project deals

    18 June 2026

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s Municipalities & Housing Ministry has awarded contracts worth over SR1.9bn ($506m) to Chinese contractors for two residential developments in the kingdom.

    The first contract has been awarded to China Architectural Construction Corporation for the construction of 2,010 housing units at the Al-Ruba residential project in Riyadh. The contract value is SR875m ($233m).

    The other contract has been awarded to China State Construction Engineering Corporation for the Al-Rasha Al-Faisaliah residential project in Dammam. The project comprises 2,426 housing units, and the contract value is over SR1bn ($266m).

    The contracts were announced during the official visit of Majed Al-Hogail, Saudi Municipalities & Housing Minister, to China, where he also signed six memorandums of understanding (MoUs) between Saudi and Chinese firms. The MoUs aim to accelerate housing development, localise advanced construction technologies and enhance public-private sector collaboration.

    MEED reported in 2020 that Riyadh planned to oversee the development of more than 1 million homes by 2025 to meet growing demand in the kingdom.

    By 2030, the Saudi capital aims to more than double its population, from 7-8 million to 15-20 million, and to become one of the 10 wealthiest cities in the world.

    READ THE JUNE 2026 MEED BUSINESS REVIEW – click here to view PDF

    GCC looks beyond the Strait; Iraq’s reform window narrows as fiscal assumptions shatter; MEED Top 100 companies.

    Distributed to senior decision-makers in the region and around the world, the June 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/17322994/main.png
    Yasir Iqbal
  • Diriyah awards $727m Waldorf Astoria superblock deal

    17 June 2026

     

    Saudi gigaproject developer Diriyah Company has awarded a SR2.7bn ($727m) contract for the main construction works on the development’s Waldorf Astoria superblock.

    The contract was awarded to the joint venture of Hassan Allam Construction Saudi and UCC Saudi, the local branch of Qatar’s Urbacon Holding.

    The Waldorf Astoria superblock is a mixed-use development comprising a Waldorf Astoria hotel, Waldorf Astoria-branded residences, commercial and residential facilities, and office space.

    The Waldorf Astoria hotel will feature 200 keys, while the residential component will comprise 47 branded residences.

    The project is located on the Grand Boulevard South and Northern Arterial Road in the Boulevard Northwestern district at Diriyah Gate 2. 

    Diriyah Company tendered the contract in November last year, with submissions due in January, as MEED reported.

    Diriyah Company Group CEO Jerry Inzerillo said: “We are delighted to announce this latest major construction contract for the Waldorf Astoria superblock as we continue to progress at pace across the Diriyah development area. The Waldorf Astoria will be a world-class addition to our growing portfolio of globally renowned hospitality brands, further strengthening Diriyah’s appeal as a globally significant destination that offers world-class hospitality and lifestyle experiences.

    “Together with our partners, we look forward to delivering another landmark development that supports the kingdom’s Vision 2030 ambitions and contributes to the continued growth and success of Diriyah.”

    Hassan Allam, chairman and CEO of Hassan Allam Holding, said: “We are proud to support the development of one of the kingdom’s most ambitious and transformative destinations and to continue our partnership with Diriyah Company in bringing its vision to life.

    “Drawing on more than 90 years of experience across the Mena region, we remain committed to delivering the highest standards of quality and excellence on landmark projects that are helping shape the kingdom’s future.”

    Ramez Al-Khayyat, UCC Holding president and group CEO, said: “Being awarded this contract by Diriyah Company marks another important milestone in our growing partnership and reinforces our shared commitment to delivering world-class developments across the kingdom. This project builds on our ongoing collaboration in Diriyah, including the delivery of four luxury hotels and the Royal Diriyah Equestrian and Polo Club in Wadi Safar.

    “We value the opportunity to contribute once again to one of Saudi Arabia’s most ambitious and prestigious urban development destinations, supporting the vision of creating a world-class cultural, hospitality and lifestyle hub.”

    The latest award follows Diriyah Company’s award of an estimated SR730m ($195m) construction contract for civic quarter buildings within the Diriyah development to local contractor Al-Rashid Trading & Contracting Company (RTCC).

    In April, Diriyah announced a SR1.84bn ($490m) construction contract to build the Saudi Arabia Museum of Contemporary Art (SAMoCA) within the Diriyah development. The contract was awarded to a consortium of Egyptian contractor Hassan Allam Construction Saudi and Saudi Arabia’s Albawani.

    In March, Diriyah Company awarded an estimated SR2.5bn ($666m) contract to build the Pendry superblock in the DG2 area.

    The Pendry superblock includes the construction of the Pendry Hotel alongside residential and commercial assets. The package will cover 75,365 square metres and is located in the northwestern district of the DG2 area.

    The previous month, Diriyah Company also awarded a SR717m ($192m) contract for the construction of the One Hotel, located in the Diriyah Two area of the masterplan, with a gross floor area of more than 31,000 sq m.

    The Diriyah masterplan envisages the city as a cultural and lifestyle tourism destination. Located northwest of Riyadh’s city centre, it will cover 14 square kilometres and combine 300 years of history, culture and heritage with hospitality facilities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/17287718/main.jpg
    Yasir Iqbal