Debt Amid the Storm: Gulf Issuers Press On Despite Market Turbulence

The Gulf’s financial markets faced a perfect storm in April 2025: escalating U.S.-China trade tensions, plummeting oil prices, and a flight of foreign capital. Yet issuers across the region are undeterred, forging ahead with debt sales to fund ambitious projects like Saudi Arabia’s Neom city and Abu Dhabi’s Red Sea Development. The question is: Why take on risk in such unstable waters?

The Turmoil Unleashed: A Perfect Storm

The turmoil’s roots lie in the U.S.-China trade war, which reached new heights in April. U.S. tariffs on Chinese goods, coupled with retaliatory measures, sparked fears of a global recession. Oil prices—a lifeline for Gulf economies—dropped 1.5% on April 2, triggering declines across regional markets:

• The index fell 0.4% on April 2, with Saudi Aramco down 0.6% and Riyad Bank sliding 1.3%.
• Dubai’s main index dropped 0.7%, led by Emirates NBD (-2.3%) and Emaar Properties (-1.3%).

Foreign investors fled ahead of the tariff announcements, with Saudi Arabia recording net outflows of $407 million—the largest since April 2024—and Qatar and Abu Dhabi losing $217 million and $206 million, respectively.

The Calculated Gamble: Why Debt Sales Proceed

Despite the turmoil, Gulf issuers are moving forward. The rationale is clear: strategic necessity.

1. Funding Diversification Initiatives:
2. Saudi Arabia’s Public Investment Fund (PIF) aims to raise $1.5–$2 billion via sukuk issuance, adding to its $11 billion raised earlier in 2025. This supports Vision 2030 projects, such as Neom, which require massive capital even in volatile markets.

3. Abu Dhabi Ports Company plans a $2 billion bond to fund port expansions, while Masdar targets $1 billion through green bonds for renewable energy projects.

4. Borrowing Costs vs. Opportunity Costs:
   While market volatility has raised borrowing costs, issuers believe the long-term benefits of funding growth outweigh the risks. For example:

6. Despite rising yields, the PIF’s early 2025 bond sales were oversubscribed, reflecting investor appetite for Gulf infrastructure projects.

7. Geopolitical and Macroeconomic Resilience:
   Gulf nations are leveraging their sovereign wealth and strategic partnerships. For instance, Abu Dhabi’s $600 billion sovereign wealth fund provides a financial buffer, while Qatar’s gas exports to Europe amid energy shortages offer a stabilizing counterweight.

The Risks: A Delicate Balancing Act

The gamble carries risks. Falling oil prices strain budgets, and corporate earnings are under pressure:
- Three out of five GCC companies missed Q4 2024 earnings forecasts, with Qatari utilities like Qatar Electricity & Water Company underperforming due to cost overruns.
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Moreover, U.S. Federal Reserve policy uncertainty looms large. Trump’s attacks on Fed Chair Powell have rattled markets, raising fears of a policy misstep that could further destabilize dollar-denominated Gulf debt.

Conclusion: Navigating the Tempest

Gulf issuers are proceeding with debt sales because they have no choice—diversification and infrastructure growth are existential imperatives. The $1.5–$2 billion sukuk from the PIF and the $2 billion bond from Abu Dhabi Ports highlight a resolve to capitalize on long-term opportunities even as short-term volatility persists.

Crucially, the market’s fragility could present buying opportunities for investors. While foreign outflows remain a concern, the region’s macroeconomic fundamentals—low public debt ratios (e.g., Saudi Arabia’s 28% of GDP) and robust sovereign wealth—are underpinnings of resilience.

Yet the path forward is fraught. If the U.S.-China trade war escalates further or oil prices slump below $70/barrel—a key threshold for fiscal sustainability—the costs of debt issuance could outpace benefits. For now, Gulf issuers are betting that the storm will pass, leaving them with the infrastructure to thrive in clearer skies.

The numbers tell the story: $13 billion in debt planned for 2025 Gulf issuers, versus $830 million in monthly foreign outflows. The question isn’t whether they’ll proceed—it’s whether the world will stabilize in time for them to reap the rewards.