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
  • Eni completes $1bn Libya gas project

    20 October 2026

    Libya’s Mellitah Oil & Gas Company, a joint venture of Libya’s National Oil Corporation (NOC) and Italian oil and gas company Eni, has achieved mechanical completion on its Bouri gas utilisation project (GUP).

    In a statement, Eni said that start-up procedures are currently under way, enabling the recovery of associated gas produced from the Bouri field, which is located in Libya’s western offshore area.

    The main contract for the project, worth $1bn, was awarded to Italy’s Saipem in August 2023.

    The project involved the construction and installation of the new Bouri gas recovery module and related tie-in infrastructure that enables the recovery and treatment of gas that was previously flared.

    In its statement, Eni said that the project “represents one of the most significant emissions reduction initiatives in Libya’s energy sector”.

    It also said that it would contribute to improving the environmental performance of the country’s production system by reducing greenhouse gas emissions by approximately 1.5 million tonnes of carbon dioxide a year.

    The recovered gas will be supplied to the domestic market, adding about 700 million cubic metres a year and helping meet demand from the power generation sector.

    The project will also support additional gas volumes available for export to Europe through the GreenStream pipeline.

    Eni said: “The start-up of the Bouri GUP confirms the joint commitment of Eni and NOC to the development of Libya’s energy sector through initiatives that combine production growth, operational efficiency and environmental stewardship.

    “The project is part of a broader strategy aimed at enhancing the value of the country’s gas resources while reducing the emissions intensity of upstream activities.”

    Other key projects currently under way in Libya include the A&E Structures Project, which is focused on bringing new offshore gas resources onstream for both the domestic market and exports, as well as initiatives aimed at upgrading and optimising gas production and transportation infrastructures.

    Eni has been present in Libya since 1959, and the company’s equity production in the country in 2025 amounted to approximately 162,000 barrels of oil equivalent a day.

    The Bouri offshore field is part of Libya’s Block NC-41, located 120 kilometres north of the Libyan coast in the Mediterranean Sea.

    It was first discovered in 1976 at a depth of 8,700 feet. It is estimated to contain 4.5 billion barrels in proven recoverable crude oil reserves and 3.5 trillion cubic feet of associated natural gas, with an annual production potential of 6 billion cubic metres.

    The first development phase, costing nearly $2bn, was completed in 1990.

    This was immediately followed by a second development phase, which entailed drilling 55 new wells and constructing three additional platforms. Production began from the oil platforms DP4 and DP3 in August 1998.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20770288/main3529.jpg
    Wil Crisp
  • Diriyah Company tenders East Wadi bridge

    20 October 2026

     

    Saudi Arabia’s Diriyah Company has invited contractors to bid on the construction of the DG II East Wadi Bridge, a key crossing within Riyadh’s Diriyah master development.  

    The bridge will provide an arterial road connection linking the Diriyah Gate Phase 2 (DG II) Infrastructure Package 1 and Package 2 zones.  

    The project scope involves the construction of a 100-metre clear-span, 44-metre-wide, single-span post-tensioned concrete bridge structure with integrated abutments and four architectural towers.  

    The contract also encompasses approach slabs, access roads, pavements, associated earthworks, architectural finishes and cladding, mechanical, electrical and plumbing installations, utility interfaces, bridge parapets, vehicle restraint systems, waterproofing, testing and commissioning, and associated temporary works.  

    The client will supply the detailed engineering design, and the selected contractor will develop the construction methodology.

    Diriyah Company issued the prequalification tender on 14 September, with submissions due by 10 December.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20769223/main.png
    Yasir Iqbal
  • Kuwait selects firms for power works at housing projects

    20 October 2026

     

    Kuwait’s Public Authority for Housing Welfare (PAHW) has appointed contractors for works covering the supply and installation of 132kV underground cables at South Sabah Al-Ahmad Residential City.

    The contracts relate to engineering, procurement and construction (EPC) packages for works for 28 main 132/11kV substations across four phases.

    According to sources, Egypt’s Elsewedy Cables has won contracts for phases 1 and 3, while China’s TBEA Shandong Luneng Taishan Cable Company has won contracts for phases 2 and 4 of the development.

    In April, MEED reported that PAHW had received at least five bids for each of the first two packages, with Elsewedy and TBEA offering $44m and $40.5m, respectively.

    The first contract (phase 1) covers seven substations in zones N9, N7 and N5. The second contract (phase 2) covers seven substations in zones N10 and N5.

    PAHW issued two further 132kV underground cable tenders for the South Sabah Al-Ahmad residential development at the end of May, as reported by MEED.

    This included a contract (phase 3) covering the supply, extension and maintenance of 132kV underground cables linked to seven substations serving the N5, N6, N8 and N10 districts. Egytech Cables, a subsidiary of Elsewedy, submitted an offer of $39.95m, the lowest of four bids.

    The other contract (phase 4) covers the supply, extension and maintenance of 132kV underground cables feeding eight main transformer substations serving the N1, N6 and N11 districts. 

    MEED reported in July that TBEA had submitted an offer of $44.06m for the contract.

    South Saad Al-Abdullah 

    Separately, PAHW has appointed contractors for power transmission works at the South Saad Al-Abdullah residential development.

    The local firm Sayed Hamid Behbehani & Sons has won a contract to supply, install and maintain 10 main 132/11kV transformer substations for the development’s third phase. 

    Another local firm, Al-Ahleia Switchgear, has won a contract to supply, install and maintain 10 main 132/11kV transformer substations for the project’s fourth phase. 

    As reported in August, the contractors submitted bids of $104.2m and $103.3m, respectively.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20761431/main.jpg
    Mark Dowdall
  • Taqa moves forward with Mirfa-Liwa scheme

    20 October 2026

     

    Taqa Transmission and Taqa Distribution are advancing a major water transmission and distribution scheme serving Mirfa, Madinat Zayed and Liwa in Abu Dhabi, sources told MEED.

    The project, originally estimated to cost $775m, has been in procurement for several years. According to sources, a request for proposals has been issued, with bids due on 5 January 2027.

    The initial submission deadline was 11 November, before it was extended.

    The project was previously tendered in December 2024, with contractors submitting bids for transmission and distribution packages in January 2025.  As of August, the bids were still under evaluation. It is unclear whether the latest tender represents a revised procurement process for the same scheme.

    The project comprises a water transmission system from Mirfa, alongside distribution networks serving farms and settlements in the western region.

    According to details seen by MEED, the latest scope includes a pumping station at Mirfa with a capacity of 128 million imperial gallons a day, about 125 kilometres of transmission pipelines to Muzairah, with branches to Madinat Zayed and Liwa Summit, and storage tanks at the three locations.

    The distribution network is divided into four geographic clusters covering Liwa East, Liwa West, Madinat Zayed and Seih Al-Kheir. The works include associated pipelines, pumping stations and storage facilities.

    The earlier procurement was structured as an engineering, procurement and construction scheme, divided between transmission and distribution works.

    As MEED understands, the latest tender is being pursued under a design, build and operate model, which extends the contractor’s responsibilities to operating the infrastructure after construction.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20758109/main2934.jpg
    Mark Dowdall
  • Contractors prepare prices for Adnoc Onshore field facilities project

    20 October 2026

     

    Contractors are preparing commercial bids for Adnoc Onshore’s project to build on-plot and off-plot facilities at the Rumaitha and Shanayel fields in Abu Dhabi’s North East Bab oil field cluster.

    The project will enhance and sustain crude output at Rumaitha and Shanayel at 45,000 barrels a day (b/d), supporting Adnoc’s Accelerated Integrated Programme 5 (AiP5) drive to lift capacity to 5 million b/d by 2027.

    Adnoc Onshore issued the main tender for engineering, procurement and construction (EPC) works on 19 June. Contractors submitted technical bids by 5 August, sources told MEED.

    The on-plot works include adding a crude processing train, produced water treatment and reinjection systems, surface water pumps, and multi-stage gas compression and dehydration units. Works also include utilities, safety and control systems, modifications to existing Phase 1 units and 220kV power infrastructure.

    The off-plot scope includes installing and tying in new gas-lifted producer and water-injection wells, as well as building and expanding wellhead clusters. Contractors will also lay crude-gathering, water-injection and gas-export pipelines connecting to the Adnoc Gas network and extend 33kV overhead power lines across the fields.

    The tender follows Adnoc Onshore’s shift in strategy for the wider North East Bab development – comprising the Al-Nouf, Rumaitha and Shanayel fields – after scrapping an earlier engineering, procurement and construction management (EPCm) approach. MEED reported in December that the operator had cancelled an off-plot EPCm contract awarded to China Petroleum Engineering & Construction Corporation (CPECC) in October 2024. Adnoc later cancelled a separate on-plot EPCm tender that it received bids for in the second quarter of 2025.

    In addition to the North East cluster, Adnoc Onshore continues to make progress on EPC works for another similar project to build off-plot facilities at the South East cluster of oil fields in Abu Dhabi, which is also integral to Adnoc Group’s AiP5 campaign.

    The South East cluster comprises the Asab, Mender, Qusahwira, Sahil and Shah fields and accounts for approximately a third of Adnoc Onshore’s oil production capacity.

    MEED previously reported that Adnoc Onshore awarded CPECC the EPC works for the South East off-plot facilities project, with the contract value estimated at around $1.2bn.

    CPECC is also performing EPC works on the South East on-plot facilities project in a consortium with Greece-headquartered Archirodon. Adnoc Onshore awarded an estimated $1.5bn contract for that project to the consortium in December 2024, with EPC works scheduled for completion in 2027.

    ALSO READ: Adnoc Onshore seeks bids for Bu Hasa field EOR project

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20757699/main.jpeg
    Indrajit Sen