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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.

 

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    Saudi Arabia’s Soudah Development Company (SDC) has outlined plans to tender the upcoming construction work at its Soudah Peaks project in the Aseer region.

    While presenting a webinar hosted by MEED on 3 July, Daniel McBrearty, chief development officer at Soudah Peaks, said: “We have several packages ready to be floated to the market by the end of this year.

    “The most immediate of these is the development of site-wide infrastructure required for the project.

    “The high-voltage electrical infrastructure catering to Soudah Peaks will be tendered by Saudi Electricity Company.”

    This package includes one bulk supply point with a capacity of 380kV /132kV, two primary substations and 142 distribution substations.

    The development will also require 15 water storage tanks and pump stations. The tanks will have a storage capacity of 93,150 cubic metres to cater to an expected demand of about 10,984 cubic metres a day (cm/d).

    A total of 14 sewage treatment plants are also planned, with a total capacity of 10,690 cm/d. The development will require 52 sewage lifting stations.

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    SDC began the project procurement process in May when it floated a tender to bid for a contract to develop an employee housing package that will be developed using a design, build, finance, operate and maintain model.

    The tendering timelines are:

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    • WP5 Site-wide infrastructure: December 2025
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      Six development zones

      “The overall masterplan covers an area of more than 635 square kilometres and consists of six development zones: Tahlal, Sahab, Sabrah, Jareen, Rijal and Red Rock,” McBrearty said.

      Tahlal offers a mix of residential, hospitality, heritage and retail facilities, along with an 18-hole golf course and the Watan Am-Soudah heritage village.

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      Sabrah provides a luxury residential destination supported by high-end hospitality. The development is integrated within the contours and is provided within a natural open space context.

      Rijal will be a hospitality destination with integrated views through to the Rijal Cultural Village. The development is built around the existing development, which gives the village its character.

      The Red Rock zone will offer luxury hospitality, with mansions and glamping camps set within the national park.

      Jareen offers a genuine approach to connecting with nature through authentic experiences within the agricultural landscape.

      Jareen will be developed as part of the third phase, when the infrastructure and connectivity are fully established within the development.

      Three phases

      “The masterplan will be developed in three phases, and the first phase will include the development of five out of the development’s six zones,” McBrearty said.

      The overall development will offer 2,810 hotel rooms, 1,337 residential units and 30 other attractions.

      The first phase will include 940 hotel keys, 391 residential units and 1,025 staff accommodation units.

      The second phase will increase the total to 1,735 hotel rooms, 641 residential units and 2,150 staff accommodation units.

      The final phase will have over 2,810 hotel rooms, 1,337 residential units and 3,022 staff accommodation units.

      We have several packages ready to be floated to the market by the end of this year. The most immediate of these is the development of site-wide infrastructure required for the project
      Daniel McBrearty, Soudah Peaks

      Companies engaged

      In March, SDC appointed US-based engineering firm Aecom as the lead design consultant for the Soudah Peaks development.

      Aecom’s scope of work covers the design work for the first phase of the development.

      Last year, SDC appointed another US-based engineering firm, Parsons Corporation, as the project management consultant for the development.

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      Project background

      Soudah Peaks is a mountain tourism destination set 3,015 metres above sea level on the country’s highest peak in the Aseer region.

      The project masterplan was formally launched in September 2023 by Saudi Arabia’s Crown Prince Mohammed Bin Salman Al-Saud.

      Speaking at the launch, he said: “Soudah Peaks will be a significant addition to the tourism sector in Saudi Arabia and place the kingdom on the global tourism map while highlighting and celebrating the country’s rich culture and heritage.” 

      Launched in 2021, SDC is wholly owned by Saudi Arabia’s sovereign wealth vehicle, the Public Investment Fund.

      An investment of SR11bn ($3bn) has been planned to develop tourism infrastructure and attractions in the Aseer region in the southwest of the kingdom.

      SDC intends to partner with the local community and private sector to develop hospitality, residential, commercial and entertainment offerings that will attract more than 2 million visitors a year, creating 8,000 direct and indirect permanent jobs by 2030.

      Aseer region seeks new investments for Saudi Arabia

      https://image.digitalinsightresearch.in/uploads/NewsArticle/14194455/main.jpg
      Yasir Iqbal
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      The UAE’s investments in Turkiye, along with the contracts won by Turkish firms in the UAE, highlight the mutual opportunities available to both countries.

      Turkiye is already the UAE’s fourth-largest non-oil trading partner, rising from seventh place in 2021. Last year, non-oil trade between the UAE and Turkiye grew by 11.5%, reaching $40.5bn.

      With this momentum set to continue, MEED's latest issue takes an in-depth look at the growing trade relationship between the two countries. 

      In our 10-page opening Agenda section, MEED editor Colin Foreman speaks exclusively to the president of the investment and finance office of the Presidency of the Republic of Turkiye, Burak Daglioglu, about bilateral investment; and talks to Kalyon Holding CEO Mustafa Kocar about the construction firm’s new focus on the Middle East. 

      There are also interviews with DenizBank CEO Recep Bastug, on the strengthening financial links, and with the vice-president of sales at Turkish Airlines, Erol Senol, on the airline’s plans for further growth. 

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      MEED's latest issue also includes a comprehensive GCC real estate report, covering all six markets in detail. While growth is continuing, the sector is showing signs of facing a more nuanced reality due to economic slowdown, regional tensions, oversupply risks and delivery constraints. Read more here.

      We hope our valued subscribers enjoy the July 2025 issue of MEED Business Review. 

       

      Must-read sections in the July 2025 issue of MEED Business Review include:

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      > CURRENT AFFAIRS:
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      INDUSTRY REPORT:
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      > PROJECTS: GCC projects market collapses

      > INTERVIEW: Hassan Allam eyes role in Saudi Arabia’s transformation  

      > INTERVIEW: Aseer region seeks new investments for Saudi Arabia

      > LEADERSHIP: Nuclear power makes a global comeback

      > LEVANT MARKET REPORT: 
      > COMMENT: Levant states wrestle regional pressures
      > ECONOMY: Jordan economy nears inflection point
      > GAS: Jordan pushes ahead with gas plans 
      > POWER & WATER: Record-breaking year for Jordan’s water sector
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      The joint venture won the contract in April 2008 and completed the facility in April 2013.

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      The project is expected to be worth about $1bn.

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    • Kuwait extends bid deadlines for projects worth $1.57bn

      3 July 2025

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      The first contract, estimated to be worth KD292m ($951m), is focused on developing a separation facility in the NK SA/BA Area, close to Gathering Centre 23 (GC-23) and GC-24.

      The scope of the contract also includes a new injection facility at GC-31 and effluent water injection networks in north Kuwait.

      The project’s latest bid deadline has been set for 22 July.

      The second contract is to develop the planned Mutriba remote boosting facility in northwest Kuwait.

      It was originally tendered earlier this year with a bid submission deadline of 29 June. The deadline has now been extended to 27 July 2025.

      The project has an estimated budget of about KD130m ($420m) and its scope includes:

      • Development of the Mutriba oil field
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      • Installation of manifolds
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      • Installation of wellhead facilities
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      The onshore Mutriba oil field is located in northwest Kuwait.

      In October 2024, KOC announced that it was preparing to tender a project management contract for a scheme to develop the field.

      At the time, it said four international companies had been invited to participate in the tender process. These were:

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      • Halliburton (US)
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      • Weatherford International (US)

      KOC also said that the list of qualified companies could be extended before the invitation to bid was issued.

      The third project, estimated to be worth $100m, is for an effluent water injection network in north Kuwait.

      Effluent water injection or water flooding is a secondary hydrocarbons recovery technique where produced water is injected into a well’s formation under high pressure and temperature conditions to recover more of the oil initially in place.

      The bid deadline has been extended from 24 June to 22 July 2025.

      The fourth project is estimated to be worth around $100m and is focused on the construction of a new injection network in north Kuwait that will service the Sabriyah/Bahra (SA/BA) area.

      Its bid deadline has also been extended from 24 June to 22 July 2025.

      Kuwait is in the middle of an upstream projects push, in line with its goal of producing 4 million barrels a day of oil by 2035.

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    • Miral tenders Harry Potter attraction in Abu Dhabi

      3 July 2025

       

      Register for MEED’s 14-day trial access 

      Abu Dhabi’s Miral has started the procurement process for the contract to build the Harry Potter-themed expansion to the Warner Bros World Yas Island entertainment destination in Abu Dhabi.

      According to sources close to the project, the tender for the estimated AED2bn-AED3bn ($545m-$816m) main construction works has been issued to contractors, with bids due in July.

      The scope of the Warner Bros World phase two expansion includes adding 40,000 square metres (sq m) to the existing theme park. This will include a Harry Potter-themed zone with three new rides, retail, and food and beverage outlets.

      The enabling works on the project have begun and are being undertaken by the local firm NSCC International. Another local firm, Emirates Electrical & Instrumentation Company, is undertaking the early works on the project.

      Canadian engineering firm Ellisdon is the project consultant.

      Responding to a request for a comment, Miral said relevant project updates would be shared in due course. “Miral does not comment on speculative and inaccurate information from unknown sources,” the developer said.

      According to media reports, the Abu Dhabi project will be the world’s sixth Harry Potter-themed park. The others are in Florida and California in the US, Beijing in China, Osaka in Japan and Leavesden in the UK.

      The Abu Dhabi project was first announced in November 2022.

      Yas Waterworld

      Miral has developed a series of theme parks and other entertainment-related attractions on Yas Island and has worked with several local and international contracting companies.

      On 1 July, Miral opened the new 16,900 sq m expansion of its Yas Waterworld park to the public.

      The expansion added 3.3 kilometres of slide sections to the park. The addition of 18 new rides and attractions, bringing the total number of rides to more than 60, is expected to grow visitor capacity by 20%.

      The construction was carried out by the local contractor Alec.

      Disney park

      In May, The Walt Disney Company and Miral signed an agreement to build a Disney theme park resort on Yas Island.

      Disney, which is based in the US, said it will be its seventh theme park resort. The others are in California and Florida in the US, Paris in France, Hong Kong and Shanghai in China and Tokyo in Japan.

      In a statement, Disney highlighted that the UAE is located within a four-hour flight of one-third of the world’s population, making it a significant gateway for tourism. It is also home to the largest global airline hub in the world, with 120 million passengers travelling through Abu Dhabi and Dubai each year.

      The Disney theme park resort in Abu Dhabi will include entertainment areas, themed accommodations, and dining and retail experiences.

      Abu Dhabi hopes bigger is better with Disney theme park

      In 2023, Miral opened SeaWorld Abu Dhabi, also on Yas Island. Alec was the contractor for the estimated $565m project.

      In 2018, Miral opened the Warner Bros theme park on Yas Island. Belgium’s Besix was the contractor for the estimated $531m project.


      Miral has developed a series of theme parks and other entertainment-related attractions on Yas Island 

      Other Miral projects have included the Etihad Arena and the indoor climbing and skydive centre Clymb. Bam of the Netherlands was the contractor for the Arena and Germany’s Zublin was the contractor for Clymb.

      Yas Island was launched as a project in 2006 by local developer Aldar Properties. The original centrepiece attractions were the Yas Marina Circuit, which hosts Formula 1 motor racing’s annual Abu Dhabi Grand Prix, and the Ferrari World theme park.

      https://image.digitalinsightresearch.in/uploads/NewsArticle/14186919/main.jpg
      Yasir Iqbal