Gulf Outlook: Ben Powell, APAC & Middle East Investment Strategist, BII

Gulf countries are operating in a global economy increasingly shaped by mega forces, notably supply-chain reconfiguration and AI’s capital-intensive buildout. These forces are shifting investment priorities beyond hydrocarbons, as capital is directed toward technology, industrial capacity and deeper global financial integration. As growth moves from capital-light to capital-intensive models, the Gulf’s scale, capital base and policy ambition support a durable role in an AI-driven global economy.

The scale and speed of the Gulf’s national transformation programs linked to the AI buildout exemplify the first theme of our 2026 Global Outlook, micro is macro. Believing the region’s AI capital spending will pay off requires conviction that AI can meaningfully lift productivity and revenues across the Gulf Cooperation Council (GCC) — a tall order, but a conceivable one.

That conviction is being expressed through infrastructure. Saudi Arabia’s state-backed AI champion, Humain, plans to build 6.6 GW of data center capacity by 2034, including 1.9 GW by 2030, positioning the Kingdom as a large-scale AI infrastructure provider. In the UAE, the Stargate project is set to become one of the world’s largest AI data center clusters, with planned capacity of 5 GW.

The Gulf can deploy power and grid capacity at scale and speed, placing it at a relative advantage versus other regions. Utility-scale solar electricity costs of roughly $20–30/MWh, based on data from BloombergNEF, IEA and IRENA, are among the lowest globally. Renewable capacity is expected to rise from around 20 GW today to approximately 165 GW by 2030, supporting world-scale data center deployment.

With savings high, debt low and balance sheets robust, financing is not a binding constraint. Yet the scale of capital expenditure, particularly in a softer energy-price environment, is reshaping how investment is funded. As governments scale spending, they are diversifying funding sources — aligning with the future of finance mega force and our second theme, leveraging up.

The region is entering a decade of capital expenditure exceeding $3 trillion across data centers, energy and transport infrastructure, based on MEED estimates, increasingly delivered through public-private partnership models that attract domestic and global private capital. Even with some near-term project recalibration, a deep pipeline of private capital deployment is forming.

Financial reforms are reinforcing this shift. In Saudi Arabia, efforts to securitize residential mortgages — around 23% of total loans in 2024, according to S&P Global — alongside easing rules on foreign real-estate ownership, are broadening funding channels.

Capital markets are deepening: initial public offering pipelines remain among the most active globally, mergers and acquisitions volumes are rising, and sovereign wealth funds are taking a more assertive role in domestic capital formation. In some markets, greater use of debt is part of the reform process rather than a source of fragility. Kuwait’s return to global bond markets for the first time since 2017 reflects this shift, with the March 2025 Financing and Liquidity Law expanding funding optionality and supporting reform spending.

For investors, these developments point to steeper external yield curves, higher local rates and expanding opportunities for equity portfolio flows amid hydrocarbon volatility, underpinning our preference for hard-currency emerging market debt.

Our third theme, diversification mirage, reflects how traditional portfolio diversifiers have become less effective, increasing the importance of idiosyncratic sources of return.

In this environment, the Gulf’s exposure to multiple intersecting mega forces alongside the region’s efforts to reshape domestic economic models may present investors with differentiated opportunities.

Beyond the region’s energy complex, sectors such as technology, metals and mining as well as transportation and logistics are positioned to drive sustained growth and deepen diversification, reinforcing the Gulf’s role in a more fragmented global economy.

Execution risks remain. Reform progress is uneven, global rate volatility and differences in market depth argue for selectivity and geopolitical risks keep risk premia elevated.

We hope you find this Outlook helpful in achieving your investment objectives. We wish you and your family health and prosperity for 2026 and beyond.