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.
Register for MEED's guest program now to access this article.
Exclusive from Meed
-
Consultant wins Jeddah metro design22 May 2026
-
-
-
Eni makes oil and gas discovery in Egypt22 May 2026
-
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
Related Articles
-
Consultant wins Jeddah metro design
22 May 2026
French engineering firm Egis has been appointed to undertake the preliminary design consultancy for the Jeddah Metro Blue Line project.
The project client, Jeddah Development Authority, issued the tender in early January, when MEED exclusively reported that Saudi Arabia had restarted plans to build the Jeddah Metro.
Engineering consulting firms submitted bids in April, as MEED reported.
The Blue Line will run from King Abdulaziz International airport and connect to the Haramain high-speed railway station.
The line will be 35 kilometres (km) long and will include 15 stations.
Project history
Plans for the Jeddah Metro were first publicly floated in the early 2010s and were formally packaged into a wider Jeddah public transport programme around 2013-14.
In 2014, French engineering firm Systra was appointed to complete preliminary engineering for the Jeddah Metro, as MEED reported at the time.
In the same year, US-based engineering firm Aecom was awarded a SR276m ($74m) contract to provide pre-programme management consultancy services.
Under its 18-month contract, Aecom was expected to provide staff to support preliminary planning and design work for various phases of the metro project.
This was followed by the appointment of UK-based architectural firm Foster + Partners in 2015 to design the metro stations.
The project then stalled as government spending priorities were reset and major capital programmes were reviewed following the fall in oil prices in 2015, with the metro’s scope, cost and delivery model coming under reassessment.
Early concept designs envisaged a multi-line network integrated with buses and, later, other city-wide mobility upgrades.
Route details
According to Jeddah Transport Company’s website, the scheme comprises 81 stations and 197 trains serving more than 161km. The network will have four lines:
- Orange Line: a 44.8km line running along Al-Madinah Road and Old Makkah Road, with 29 stops including one at Obhur Bridge
- Blue Line: a 35km line running from King Abdulaziz International airport to the Haramain high-speed railway station, with 15 stations
- Green Line: a 17km line running through the city centre, from the downtown area to the Haramain railway station, with nine stops
- Red Line: A 59.7km line running from King Abdullah Stadium north to Old Makkah Street through King Abdulaziz Road and King Abdullah Road, with 25 stops
> Be recognised among the best in the industry at the MEED Projects Awards 2026 …
https://image.digitalinsightresearch.in/uploads/NewsArticle/16949416/main.jpg -
Egypt signs gas deal with QatarEnergy and Exxon Mobil
22 May 2026
Egypt’s Ministry of Petroleum & Mineral Resources has signed a preliminary gas agreement with state-owned QatarEnergy and US-based Exxon Mobil.
The memorandum of understanding (MoU) focuses on cooperation in the development of natural gas discoveries in Cyprus.
The plan involves transporting gas from offshore discoveries in Cypriot waters to Egypt via pipelines.
In a statement, Egypt’s Ministry of Petroleum & Mineral Resources said that the deal would strengthen the North African country’s status as a regional hub for natural gas trading.
The agreement was witnessed by Egypt’s Prime Minister Mustafa Madbouli.
It was signed by Muhammad Al-Bajouri, from the legal affairs department of the Ministry of Petroleum & Minerals, and Kanan Nariman, vice-president for the development of liquefied natural gas (LNG) at Exxon Mobil.
It was also signed by Ali Immunae, director of international exploration and production at QatarEnergy.
Commenting on the MoU signing, Saad Sherida Al-Kaabi, the minister of state for energy affairs, and president and chief executive of QatarEnergy, said: “This MoU represents an important step in advancing regional energy cooperation across the Eastern Mediterranean through unlocking the long-term commercial potential of natural gas resources across that region.”
Egypt’s Ministry of Petroleum & Mineral Resources said the agreement paved the way for QatarEnergy and Exxon to take advantage of existing Egyptian infrastructure in the gas sector, especially the country’s existing LNG export terminals.
Under the terms of the agreement, a study will be conducted to analyse the feasibility of linking the gas discoveries in Cyprus to Egypt’s gas facilities.
The signatories will also establish a commercial framework aimed at achieving “the maximum possible benefit from natural gas resources in both Egypt and Cyprus”.
Egypt’s Minister of Oil and Gas Karim Badawi said the ministry has been working with ExxonMobil to explore cooperation on the development of gas discoveries in Cyprus.
He said the partnership with Egypt would help QatarEnergy and Exxon reduce the cost of developing the discoveries while allowing Egypt to achieve an economic return.
READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDFGlobal energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.
Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
> REGIONAL LNG: War undermines business case for Middle East LNG> CAPITAL MARKETS: Damage avoidance frames debt issuance> MARKET FOCUS: Conflict tests UAE diversificationTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/16944918/main.jpg -
Kuwait’s Heisco working on active projects worth $3.5bn
22 May 2026
Kuwait’s Heavy Engineering Industries & Shipbuilding Company (Heisco) is in a strong position to weather challenges in the country’s project market, with active projects worth $3.5bn, according to documents seen by MEED.
The company also has active maintenance and service contracts that are worth $843m.
Heisco’s projects span the oil, gas, power, water, construction, transport and industrial sectors.
The company’s biggest active project contract is the $576m project to upgrade Kuwait’s Doha West power station.
This contract was awarded to Heisco by Kuwait’s Ministry of Electricity, Water & Renewable Energy (MEW) in July 2024.
The company’s second-biggest active project is focused on the construction of crude oil pipelines and associated works in North Kuwait.
This $565m contract was awarded to Heisco by Kuwait’s state-owned upstream operator Kuwait Oil Company (KOC) in February this year.
Other major project contracts include a $442m MEW contract for the rehabilitation of the Az-Zour South power and water distillation station and a $223m KOC contract for the construction of flowlines and associated works in the West Kuwait Area.
Heisco’s biggest active maintenance contract is worth $295m and is focused on providing mechanical maintenance services at Kuwait’s Mina Abdullah Refinery.
This contract was awarded by the state-owned downstream operator Kuwait National Petroleum Company (KNPC) in July 2023 and it officially started in September that year.
The contract is currently due to conclude in November 2028.
Heisco’s second-biggest active maintenance contract is worth $95m and was awarded by Wafra Joint Operations (WJO) for work in the Divided Zone, which is shared by Kuwait and Saudi Arabia.
WJO’s onshore operations cover an area of about 5,000 square kilometres in the Divided Zone.
Saudi Arabian Chevron and Kuwait Gulf Oil Company are equal shareholders in WJO.
Six major fields have been discovered in the WJO area to date: Wafra, South Fuwaris, South Umm-Gudair, Humma, Arq and North Wafra.
Heisco’s Wafra maintenance contract was awarded in October last year and officially started in November the same year.
The contract is expected to conclude in May 2031 and its scope is focused on the maintenance of tanks and vessels as well as the provision of welding services.
Market headwinds
Kuwait’s oil and gas sector has been severely impacted by the blockade of the Strait of Hormuz, through which all of its crude exports are normally shipped.
The country recorded zero crude oil exports in April for the first time since the end of the Gulf War in 1991, according to shipping monitor TankerTrackers.com.
While the closure of the Strait of Hormuz is expected to have a significant impact on Kuwait’s project sector for some time, Heisco’s strong project pipeline is likely to help it weather the challenging economic environment.
READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDFGlobal energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.
Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
> REGIONAL LNG: War undermines business case for Middle East LNG> CAPITAL MARKETS: Damage avoidance frames debt issuance> MARKET FOCUS: Conflict tests UAE diversificationTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/16792105/main.png -
Eni makes oil and gas discovery in Egypt
22 May 2026
A joint venture of Italy’s Eni and state-owned Egyptian General Petroleum Corporation (EGPC) has made a major oil and gas discovery in Egypt’s Western Desert region.
The partnership, known as Agiba Petroleum Company, made the discovery with an exploratory well drilled in the Bustan South block.
Initial estimates indicate the presence of approximately 330 billion cubic feet of gas and 10 million barrels of condensate and crude oil.
Together, this is a total of 70 million barrels of oil equivalent (boe), making the discovery Agiba Petroleum Company’s biggest in 15 years.
The new discovery is located only 10 kilometres from existing facilities and infrastructure, which should enable rapid development and connection to production.
The well revealed several sandstone and limestone reservoirs, according to a statement from Egypt’s Ministry of Petroleum & Mineral Resources.
The ministry said: “This new discovery reflects the success of the Ministry of Petroleum & Mineral Resources’ efforts and the incentives it offered to partners to intensify exploration activities in areas adjacent to existing fields.
“This facilitates new discoveries near existing infrastructure and production facilities without the need for new infrastructure development.
“This contributes to reducing the cost of producing a barrel, accelerating the integration of discoveries into the production map, and encouraging partners to implement the latest data collection and analysis technologies to increase the chances of successful exploration.”
Egypt is seeing increased interest in its oil and gas resources due to disruptions to shipping through the Strait of Hormuz, which have significantly reduced oil and gas exports from the GCC and Iraq.
READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDFGlobal energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.
Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
> REGIONAL LNG: War undermines business case for Middle East LNG> CAPITAL MARKETS: Damage avoidance frames debt issuance> MARKET FOCUS: Conflict tests UAE diversificationTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/16944815/main.jpg -
King Salman airport selects three contractors for apron ECI
21 May 2026
Saudi Arabia’s King Salman International Airport Development Company (KSIADC) has selected three groups to deliver the Terminal 6 apron, taxiways and other airfield infrastructure at King Salman International airport (KSIA) in Riyadh.
KSIADC, which is backed by Saudi sovereign wealth vehicle the Public Investment Fund, will initially deliver the project on an early contractor involvement (ECI) basis.
The selected groups are:
- Nesma & Partners / Limak / Samsung C&T / Alayuni Investment & Contracting (local/Turkiye/South Korea/local)
- Shibh Al-Jazira Contracting Company / Top International Engineering Corporation (local/China)
- Al-Rashid Trading & Contracting Company / IC Ictas (local/Turkiye)
The ECI process requires selected contractors to submit methodologies for the project and a design proposal. One team will then be selected for the construction.
MEED understands that the total package could be worth upto $800m.
In March, MEED exclusively reported that KSIADC had selected three groups for the construction of Terminal 6 at KSIA in Riyadh.
In November last year, MEED exclusively reported that KSIADC was targeting mid-2026 to award the contract for the construction of Terminal 6.
MEED reported in May 2025 that US firm Bechtel Corporation had been appointed as the delivery partner for the terminals at KSIA.
According to local media reports, KSIADC’s acting CEO, Marco Mejia, said the project developer had completed the project’s masterplan.
The reports added that Terminal 6 will boost the airport’s capacity by 40 million passengers.
The project is expected to be delivered before the start of Expo 2030 Riyadh.
MEED’s April 2026 report on Saudi Arabia includes:
> COMMENT: Risk accelerates Saudi spending shift
> GVT &: ECONOMY: Riyadh navigates a changed landscape
> BANKING: Testing times for Saudi banks
> UPSTREAM: Offshore oil and gas projects to dominate Aramco capex in 2026
> DOWNSTREAM: Saudi downstream projects market enters lean period
> POWER: Wind power gathers pace in Saudi Arabia
> WATER: Sharakat plan signals next phase of Saudi water expansion
> CONSTRUCTION: Saudi construction enters a period of strategic readjustment
> TRANSPORT: Rail expansion powers Saudi Arabia’s infrastructure pushTo see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/16937556/main.jpg