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
  • Bahrain retenders Hawar desalination works

    25 September 2026

     

    Bahrain’s Electricity & Water Authority (EWA) has retendered a contract to develop a seawater intake and outfall system for a planned seawater reverse osmosis (SWRO) desalination plant on Hawar Island.

    The scope includes constructing a seawater intake facility with a capacity of 1,515 cubic metres an hour and a seawater outfall structure with a diffuser system.

    The bid deadline is 21 October.

    The original tender received just two bids from Noble Development (UAE) and Al-Hassanain Company (Bahrain). These were opened in December 2025.

    The reissued tender is expected to attract bids from Al-Hassanain Company, Noble Development, UK-based engineering consultancy HR Wallingford, Bahrain Mechanical & Diving Services and Ocean Diving & Marine Services (Bahrain).

    As previously reported, the marine works project is linked to two other contracts: one covering the main Hawar desalination plant and another involving the construction of two ground storage tanks and the installation of water transmission pumps.

    Malaysia-based Sparco Engineering recently won the engineering, procurement and construction contract for the desalination plant project after submitting the lowest bid last year.

    The plant is designed to produce 1 million imperial gallons a day (MIGD) of potable water.

    The Hawar Islands form an archipelago of 16 desert islands and islets located approximately 26 kilometres southeast of Ras Al-Bar in Bahrain. The desalination plant is intended to support water supply requirements on the islands.

    The third package linked with the SWRO project was tendered last November, with Greece-headquartered Ergotem submitting the lowest bid of $1.92m.

    This contract covers the construction of two steel ground storage tanks with a capacity of 1 million gallons each, pumping stations, motors, pipelines and associated facilities.

    As of August, the contract had not yet been awarded.

    It is understood that Sparco Engineering will be required to ensure that the plant’s design and construction align technically and operationally with these two projects so that all three components function together as one integrated system.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19993971/main.jpg
    Mark Dowdall
  • Dubai property bubble risk rises as price growth stalls

    25 September 2026

    Register for MEED’s 14-day trial access 

    Dubai’s residential property market remains in elevated bubble-risk territory after a sharp slowdown in price growth, according to UBS.

    The emirate’s housing boom came to an abrupt halt at the onset of the regional conflict, the Swiss bank said in its Global Real Estate Bubble Index 2026 report. Inflation-adjusted house prices have fallen back to mid-2025 levels, after real growth of more than 10% in 2025.

    Dubai scored 1.16 on the index, up on last year, placing it fourth among the 23 cities covered. Only Zurich and Tokyo, at 1.69 and 1.54 respectively, are classed as high risk. Miami, Seoul, Geneva and Lisbon join Dubai in the elevated category, which covers scores between 1.0 and 1.5.

    Real prices in Dubai rose by 0.4% in the year to Q2 2026, while real rents fell by 4%. UBS said bubble risk remained elevated despite some easing since March.

    Ownership costs

    UBS said existing tenants were likely to take advantage of the pause in price growth and, in some cases, price concessions to buy homes. Despite elevated mortgage rates, Dubai remains one of the few markets where ownership is relatively attractive given the high cost of renting, according to the bank.

    A skilled service worker in Dubai needs about five years of average income to buy a 60-square-metre apartment near the city centre, compared with about 15 years in Hong Kong and 11 years in London. It takes 16 years of rent to pay for an equivalent apartment, one of the lowest ratios in the study. UBS attributed the low price-to-rent ratios in Dubai, Sao Paulo and the US cities surveyed to less regulated rental markets and higher interest rates, as well as elevated risk premiums in Dubai and Sao Paulo.

    The bank said uncertainty over whether the inflow of high-income earners would recover was weighing on the premium segment. It added that Dubai’s structural advantages, including its strategic location and its appeal as an international business hub, remained intact, and that an improvement in the geopolitical environment was likely to support a rapid recovery in market sentiment and price expectations.

    Supply is a further source of uncertainty. Some developments have stalled, and others may be delivered later than planned, although UBS said the market remained exposed to heightened volatility because of persistent concerns about structural oversupply.

    Global slowdown

    Across the cities analysed, real residential prices rose by an average of 0.5% in the year, down from 1.4% in mid-2025. Seoul recorded the strongest real growth, at 11%, while Toronto and Vancouver fell by about 10%.

    The report also points to Gulf capital supporting other markets. UBS said interest from Middle Eastern buyers could further lift prices in Geneva, and that investors from the Middle East, the US and Asia had supported London’s prime segment.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19987757/main.jpg
    Colin Foreman
  • UAE vehicle manufacturing push moves into production

    25 September 2026

     

    Register for MEED’s 14-day trial access 

    Chinese-linked carmaker Rox has begun vehicle production at Khalifa Economic Zones Abu Dhabi (Kezad). The start-up represents the most significant output so far from the UAE’s efforts to build an automotive manufacturing industry.

    The first three Rox Adamas vehicles, carrying the Made in the Emirates mark, came off the production line at the company’s new Abu Dhabi facility in early September. The 10,000-square-metre plant is expected to reach an initial capacity of 20,000 vehicles a year by 2027, rising to 300,000 vehicles a year by 2030.

    The facility can sub-assemble more than 80 types of vehicle components and also carries out complete vehicle assembly, calibration, rain and road testing, and final inspection. Rox moved its global headquarters to the UAE last year and plans to supply local and export markets.

    The project forms part of Rox’s partnership with the Abu Dhabi Investment Office (Adio) and is supported by the UAE Ministry of Industry & Advanced Technology. Kezad Group signed the lease agreement for the facility in May.

    Programme targets

    The Rox plant is the first major output of a state-led strategy that has gathered pace over the past 18 months. Adio launched its automotive programme at the Make it in the Emirates forum in May 2025, with the aim of creating a hub for vehicle manufacturing and assembly, research and development, restoration, auctions and luxury cars.

    The programme is projected to contribute AED100bn ($27.2bn) to Abu Dhabi’s GDP by 2045, attract more than AED8bn ($2.2bn) in foreign direct investment and create 7,000 skilled jobs. Adio has also introduced an automotive artificial intelligence curriculum with universities to develop Emirati talent in the sector.

    In October last year, Adio and AD Ports Group agreed to work with Netherlands-based Stellantis to develop the emirate’s automotive ecosystem. The memorandum of understanding covers expansion into Middle East and Africa markets, an ecosystem for autonomous taxi services, and research into next-generation mobility technologies.

    Under the agreement, Stellantis will explore investment opportunities in Abu Dhabi, while Adio and AD Ports Group will provide market intelligence and logistics support. The announcements did not include a commitment to build a production facility.

    Kezad already hosts smaller electric vehicle (EV) operations. In 2024, UAE-headquartered NWTN signed a lease for a Kezad facility with capacity to assemble 5,000-10,000 semi-knocked-down EVs a year, with plans to expand to 50,000 units in a second phase.

    Trading hub

    Dubai has focused on vehicle trade rather than manufacturing. In November last year, Dubai Municipality signed a partnership agreement with DP World’s Economic Zones division to establish and manage the Dubai Auto Market, a 22 million-square-foot complex with more than 1,500 showrooms that is designed to handle over 800,000 new and used vehicles a year.

    Enabling works are under way, carried out by local contractor Rad International Road Construction, with US-based Aecom serving as project consultant. Sheikh Maktoum Bin Mohammed Bin Rashid Al-Maktoum, first deputy ruler of Dubai, said at the launch that the project would foster a cluster of light industries for vehicle assembly and trade.

    The market builds on an established base. Jebel Ali Free Zone hosts more than 940 automotive and spare-parts companies, including Ford, General Motors, Honda, Hyundai, Nissan and Volkswagen. In 2022, M Glory Group laid the foundation stone for a AED1.5bn ($408m) EV plant at Dubai Industrial City, with a planned capacity of 55,000 cars a year.

    Regional competition

    The UAE is not alone in pursuing automotive manufacturing. In Saudi Arabia, the Public Investment Fund (PIF) owns 70% of Hyundai Motor Manufacturing Middle East, which will roll out its first vehicle by Q4 2026 and targets annual production of 50,000 vehicles. Ceer, the kingdom’s first EV manufacturer, intends to roll its first vehicle off the production line in late 2026.

    Saudi Arabia’s National Industrial Strategy aims to attract three to four manufacturers capable of producing more than 300,000 vehicles a year within a single automotive cluster. In Qatar, JTA International Investment Holding said last month that it was working with the UK’s Watt Electric Vehicle Company to set up a factory.

    The two leading Gulf economies are taking different approaches. Saudi Arabia has relied on direct PIF shareholdings in manufacturers. In the UAE, investment offices, port groups and economic zone operators have led the effort, using land, logistics and incentives to attract privately owned carmakers.

    Scaling up is the next test. Rox’s plan to increase output fifteen-fold between 2027 and 2030 will show whether Abu Dhabi’s model can support volume manufacturing. Achieving it would give the UAE production capacity comparable to the level Saudi Arabia is targeting across its entire automotive cluster.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19986887/main.jpeg
    Colin Foreman
  • SAR prepares phosphate rail second section contract award

    25 September 2026

     

    Saudi Arabian Railways (SAR) is preparing to formally award another multibillion-riyal contract to double the tracks on the existing phosphate transport railway network connecting the Waad Al-Shamal mines to Ras Al-Khair in the kingdom’s Eastern Province.

    The contract covers construction works on the second section of the railway line, spanning more than 150 kilometres (km).

    The scope of work includes civil works, alignment modifications, track and loop construction, and associated infrastructure such as bridges and culverts, as well as enhancements to signalling and telecommunications systems.

    SAR floated the tender in February, and bids were submitted in April.

    SAR is making significant progress on its Phosphate 3 rail programme. Last month, MEED exclusively reported that SAR had awarded an estimated SR4bn-plus ($1.1bn) contract to add another track to the first section of the existing phosphate transport railway network.

    The contract was awarded to local firm Alomaier Trading & Contracting Company.

    The scope includes track doubling, alignment modifications, utility bridges, culvert widening and hydrological structures, as well as the conversion of the AZ1 siding into a mainline track. It also covers support works for signalling and telecommunications systems.

    The existing railway runs from the Waad Al-Shamal mines to Ras Al-Khair. The first-section works will cover about 100km, connecting the AZ1/Nariyah Yard to Ras Al-Khair.

    Switzerland-based engineering firm ARX is the project consultant.

    Formerly known as the North-South Railway, the North Train is a 1,550km freight line running from the phosphate and bauxite mines in the far north of the kingdom to the Al-Baithah junction. From there, it diverges into a line south to Riyadh and another line east to downstream fertiliser production and alumina refining facilities at Ras Al-Khair on the Gulf coast.

    Adding a second track and freight yards will significantly increase the network’s cargo-carrying capacity and support growth in industrial production. Project implementation is expected to take four years.

    State-owned SAR is also considering increasing the localisation of railway materials and equipment, including developing a cement sleeper manufacturing facility.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19983928/main.jpg
    Yasir Iqbal
  • Meraas awards $272m Nad Al-Sheba Gardens villas deal

    25 September 2026

    Dubai-based real estate developer Meraas Holding, part of Dubai Holding, has awarded a AED1bn ($272m) contract for the construction of the seventh phase of the Nad Al-Sheba Gardens community.

    The contract, which covers the delivery of 272 villas and townhouses, was awarded to local firm GCC Contracting.

    The scope of work includes 130 villas, 142 three-bedroom townhouses, and associated utilities and infrastructure.

    Construction has started, and the project is slated for completion in 2028.

    Last year, Meraas awarded a AED690m ($188m) contract for the construction of the fourth phase of the Nad Al-Sheba Gardens community in Dubai.

    Meraas awarded the contract to local firm Bhatia General Contracting.

    The scope of that contract covers the construction of 92 townhouses, 96 villas and two pool houses.

    In December last year, Meraas announced the eleventh and final phase of its Nad Al-Sheba Gardens residential community. This phase includes the development of 210 new villas and townhouses, as well as a school, located in the northwest corner of the development.

    According to UK analytics firm GlobalData, the UAE’s construction industry will register annual growth of 3.9% between 2025 and 2027, supported by investments in infrastructure, renewable energy, oil and gas, housing, industrial and tourism projects.

    The residential construction sector is expected to record an average annual growth rate of 2.7% between 2025 and 2028, supported by private investment in residential housing, along with government initiatives to meet rising demand.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19983032/main.png
    Yasir Iqbal