The war in the Middle East is putting the Gulf’s vast sovereign wealth under a new kind of strain, as governments confront mounting pressure on public spending and revenues and disruptions to trade, energy exports and shipping — forcing them to weigh how far they are willing to draw on fortunes built for the future.
In Kuwait, that debate has already moved from theory to policy. The cabinet recently issued a decree allowing the government to borrow from its Future Generations Reserve Fund to bolster the country’s General Reserve Fund, effectively opening a carefully guarded pool of long-term savings as the economic costs of the conflict mount.
Kuwait’s move raises a broader question about the role Gulf sovereign wealth funds could play during periods of crisis. The funds have grown into some of the world’s largest investors, amassing assets that give regional governments substantial financing options alongside conventional borrowing and general reserves.
The Kuwaiti decree permits borrowing from the Future Generations Reserve under several restrictions. Most notably, total borrowing in any fiscal year may not exceed the fund’s average investment returns over the preceding five years.
Cumulative borrowing may also not exceed 10 percent of the reserve’s net assets.
The Kuwait Investment Authority manages two main funds: the General Reserve Fund, which serves as the government’s primary treasury, and the Future Generations Reserve Fund, established in 1976 to invest a portion of state revenues for future generations.
The decision to permit borrowing comes as the gap has widened between the resources available to the General Reserve Fund and the wealth accumulated in the Future Generations Reserve. The Kuwait Investment Authority is estimated to oversee about $1 trillion in assets, making it one of the world’s largest sovereign investors.
Kuwait has tapped its future-generations wealth before. After Iraq invaded the country in 1990, the reserve helped finance reconstruction. In subsequent periods, Kuwait also carried out transfers of assets between its two reserve funds.
Mohammed Ramadan, a former adviser to Kuwait’s finance minister, said the significant change this time was the creation of a formal borrowing mechanism.
“The Future Generations Reserve is extremely large, while the General Reserve has become weak,” Ramadan told Alhurra.
Kuwaiti law draws a distinction between the state’s general revenues and investment returns generated by its sovereign funds. Oil revenues and other domestic income flow into the state budget, while returns generated by the Future Generations Reserve are not counted among the revenues used to finance public spending.
Ramadan said the new safeguards were designed to support the General Reserve without significantly eroding the Future Generations Reserve.
Gulf Funds Become Global Heavyweights
Over the past several years, Gulf sovereign wealth funds have emerged as some of the world’s biggest owners of assets and investments, expanding their holdings across equities, real estate, infrastructure, energy, technology and artificial intelligence. At home, they have also become important engines of governments’ economic diversification plans.
In 2025, seven of the largest Gulf funds invested about $119 billion, accounting for roughly 43 percent of all capital deployed by sovereign wealth funds worldwide that year, according to Global SWF.
Their investment activity has continued during the current war. Gulf sovereign wealth funds deployed about $53.9 billion across 108 transactions in the first half of 2026, with Abu Dhabi’s Mubadala emerging as the most active, investing $15.2 billion.
But the purpose and structure of sovereign funds vary across the Gulf.
In Kuwait, the Future Generations Reserve is explicitly intended to preserve part of the country’s wealth for the future. Saudi Arabia’s Public Investment Fund, by contrast, manages assets and investments that are closely tied to the kingdom’s domestic economic transformation.
The United Arab Emirates is home to several major funds, including the Abu Dhabi Investment Authority, Mubadala and ADQ. Elsewhere in the Gulf, Qatar operates the Qatar Investment Authority, Oman has the Oman Investment Authority, and Bahrain has Mumtalakat.
The Qatar Investment Authority, for example, is estimated to have assets of about $600 billion.
The Financial Times previously reported that Doha had turned to its sovereign wealth fund to help maintain economic stability during the current war, while some government entities were instructed to cut their budgets by as much as 30 percent.
Qatar’s Foreign Ministry spokesman later disputed figures cited in the newspaper’s report, saying the 30 percent reduction was part of precautionary measures introduced at the beginning of the crisis and applied only to operating expenses, not salaries or capital expenditure.
S&P Global Ratings, meanwhile, said Qatar’s government was relying in 2026 on a combination of borrowing and asset drawdowns to finance its deficit. It said the government’s liquid assets included holdings of the Qatar Investment Authority, the Budget Stabilization Fund and central bank reserves.
Yousef al-Houti, an Omani writer and economist, said the continuing war was gradually pushing some sovereign wealth funds beyond their traditional role as long-term investors and turning them into a “financial bridge” during periods of crisis, particularly as spending rises and some sources of revenue decline.
But tapping sovereign wealth does not necessarily mean directly withdrawing money from a fund or selling its investments.
Governments can use available liquidity or investment returns, borrow from a fund as Kuwait has done, turn to debt markets or sell stakes in companies and other existing investments.
Saudi Arabia recently began talks to raise at least $8 billion through a new loan, Bloomberg reported, after raising about $6 billion through domestic and international debt issuance this year.
The Public Investment Fund, meanwhile, raised $7 billion in the bond market in May as it reshaped its investment strategy for the 2026-2030 period.
In the United Arab Emirates, authorities have announced no extraordinary withdrawals from the country’s major sovereign funds to finance the budget because of the war.
Instead, Mubadala said in April that assets under management had risen 17 percent to about 1.4 trillion dirhams, or roughly $385 billion, as the fund continued investing during the year.
War Hits Gulf Energy Exports
The war with Iran has dealt a severe blow to Gulf energy exports.
Kuwait recorded no crude oil exports in April for the first time since the end of the Gulf War in 1991, after exporting about 1.2 million barrels a day in February.
Kuwait Petroleum Corporation declared force majeure in March as shipping through the Strait of Hormuz was disrupted, before gradually easing those restrictions as conditions improved.
Qatar also halted liquefied natural gas production and declared force majeure on several export contracts. Bahrain’s oil production declined, while the Abu Safah offshore oil field it shares with Saudi Arabia was shut down in March.
The sheer scale of the Gulf states’ sovereign assets gives their governments a range of financing options. During the war, government and quasi-government entities across the region have turned to debt markets and bank loans while also drawing on reserves and available liquidity.
Mohammed al-Qayad al-Shaliekhi, a former adviser to Saudi Arabia’s labor and housing ministries, said the crisis had underscored another function of sovereign wealth funds: acting as a “shock absorber” alongside their original mission of building wealth for the future.
Al-Houti said borrowing allows governments to preserve invested assets rather than selling them, giving policymakers another tool for absorbing economic shocks.
But he cautioned that such flexibility carries its own risks.
“The problem begins,” he said, “when exceptions become a permanent way of financing public finances.”
