Yet, this data is puzzling because other indicators show that the economy remains in good health. Non-oil growth has slowed, but at 3.7% in the third quarter of 2025 it was hardly weak. Meanwhile, indicators of employment from other sources suggest that job creation for Saudi nationals has continued at a reasonable clip. The Labor Force Survey data seems disconnected from most other economic indicators. This raises the possibility that the survey is providing misleading signals about the current state of the Saudi labor market.

A Closer Look at Saudi Labor Market Data

The key variables in the Labor Force Survey are the unemployment rate, labor force participation rate, and employment-to-population ratio. The unemployment rate is the number of people who are unemployed as a share of the labor force (defined as the total of all those who are employed and unemployed). The labor force participation rate is the labor force as a share of the working age population (defined as those aged 15 and above). The employment-to-population ratio is the number of employed people as a share of the working age population (again defined as those aged 15 and above).

Data on the unemployment rate, labor force participation rate, and employment-to-population ratio come from Saudi Arabia’s quarterly Labor Force Survey. As the name suggests, this data is based on a survey of a sample of the population (nationals and expatriates) in which respondents are asked a series of questions about their labor market activities. Employment data is also collected in the survey, but it is not published. Rather, the published employment data comes from the administrative records of the General Organization for Social Insurance and the Ministry of Human Resources and Social Development. This data is often referred to as “administrative” or “register-based” labor market data.

There are significant definitional differences between the Labor Force Survey and register-based data. The latter is a narrower measure of employment, as people working in the military and security services and those who are not registered with the General Organization for Social Insurance (which could include the self-employed and freelancers) do not feature. In mid-2024, the “register-based” data showed that 3.9 million Saudis were employed, while the author’s estimate is that the (unpublished) Labor Force Survey measure showed 6.2 million Saudis as employed. It is not clear why the statistics authorities do not publish the employment data from the survey – if there are concerns about its quality, these concerns would equally apply to the other data from the survey that is published.

The Labor Force Survey shows that the unemployment rate among Saudi nationals hit an all-time low of 6.3% in the first quarter of 2025 but subsequently increased to 6.8% in the second quarter and 7.5% in the third quarter. While this rate is still low by historical standards – as recently as the third quarter of 2022, it was over 10% – the 1.2 percentage point increase over two quarters is large and defies the usual seasonal pattern whereby the unemployment rate drops in the second quarter.

Source: General Authority for Statistics

The declines in the labor force participation rate and employment-to-population ratio for Saudi nationals in the second and third quarters were also unusually large. Both indicators have been on an upward trend in recent years but fell by over 2 percentage points from 51.3% to 49% and 48% to 45.3%, respectively, between the first and third quarters of 2025 (with most of the decline in the second quarter). In the third quarter, the indicators were at their lowest levels since mid-2021 and mid-2022 respectively.

In contrast, the employment of Saudi nationals remained on a positive trend according to the register-based data. Employment increased by a total of 76,000 in the second and third quarters of 2025 compared to a 52,000 increase in the same two quarters of 2024. Continued  employment growth is consistent with the results of the Riyadh Bank purchasing managers’ survey that shows that companies are still feeling optimistic about hiring.

A Difficult Circle to Square

A higher unemployment rate, a lower participation rate and employment-to-population ratio, and continued job creation are difficult to square with each other. There are two possible explanations. The first is that there has been a substantial acceleration in the growth of the working age population. The second is that there has been a divergence between the register-based and Labor Force Survey employment data.

A rapid increase in the working age population could be consistent with a drop in the employment-to-population ratio at a time of rising employment, a decline in the participation rate (as those aged 15-24 have a lower participation rate given many are in school or college), and an increase in the unemployment rate if employment does not grow sufficiently quickly to absorb the new entrants to the labor force. During 2023-24, the working age population grew by an average 3.2% per year. Looking at the age structure of the population in the 2024 population statistics, there is no reason to believe the growth rate of the working-age population would have significantly accelerated in 2025. Yet, to generate the observed movements in the unemployment, participation, and employment rates between the first and third quarters of 2025, the working age population would have had to increase by 6%. This is not realistic.

It therefore seems that the (unpublished) employment data from the Labor Force Survey must be telling a different story from the register-based data. Differences between the two data sources are not unusual. From mid-2022 to mid-2024, the register-based and survey data both showed increasing Saudi employment, but the estimated increase from the Labor Force Survey was nearly twice as large as from the register-based data – 560,000 new jobs created compared to 290,000. The author’s estimates suggest that employment in the survey data would have had to decline by around 90,000 over the past year to be consistent with the reported decline in the employment-to-population ratio (in the absence of population estimates for 2025, this estimate assumes growth in the working age population of 0.8% a quarter, in line with recent experience). This compares to an increase of 155,000 jobs in the register-based employment data over the same period, which seems easier to rationalize given current economic conditions.

Sources: General Authority for Statistics; author’s calculations.
Note: Data shows the change in employment over the previous four quarters. The Labor Force Survey series is estimated.

Tread With Care

Given the emphasis that Vision 2030 places on increasing employment for Saudi nationals, having data that accurately tracks the trends in the labor market is essential. Unfortunately, at present, the published labor market data is difficult to interpret and does not seem to tell a consistent story across key variables. The decline in employment that seems to be implied in the Labor Force Survey is particularly difficult to rationalize given current economic conditions. This raises the question of whether the survey is accurately reflecting current conditions in the Saudi labor market.

Concerns about the quality of the Labor Force Survey data are not new. There has been considerable quarter-to-quarter volatility in the data in the past even during periods of relative economic calm. The reason for this volatility is unclear, but it could potentially be due to low survey response rates or sampling issues, as households are rotated in and out of the survey sample. Concerns are magnified by the fact that the labor market module of the 2022 Population Census, a key input for the survey, has still not been published more than two years after the initial round of census data was released. Improving the quality of the labor market data should be a high priority, as good data is the basis for good economic policymaking.

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Since 2022, there has been an exceptional wave of IPO activity in Gulf stock exchanges, raising over $50 billion. Saudi Arabia and the United Arab Emirates accounted for most of these proceeds, followed by Oman to a lesser yet still notable extent. These listings have taken place across the Saudi Stock Exchange, Saudi Parallel Market (Nomu), Abu Dhabi Securities Exchange, Dubai Financial Market, and Muscat Stock Exchange.

Government-led initiatives and regulatory reforms have laid the foundation for the Gulf’s IPO surge, strengthening capital markets and opening the door for a wider range of companies to list. What began as a wave dominated by large, high-profile issuers in energy, logistics, and utilities has since expanded to include mid-sized and emerging firms across industries alongside a noticeable shift toward more selective investor behavior. Taken together, these changes suggest that the region’s IPO landscape is entering a more mature and globally aligned phase.

Government-Supported Momentum

Government-led initiatives and regulatory reforms across Gulf states have helped set the stage for the strong IPO momentum in recent years. Capital markets now serve as a key pillar of these countries’ economic diversification strategies. In Saudi Arabia, the Financial Sector Development Program was established in 2018 under Vision 2030 to transform the kingdom’s capital market into a global financial hub. That same year, a privatization program was launched to boost private sector participation by identifying select state-owned assets across various industries to be privatized and listed on the market.

In the years since, Saudi Arabia has rolled out a series of additional reforms to enhance capital market activity. Notably, in 2024, Saudi Arabia introduced the “Updated Investment Law” to streamline the registration process for foreign investors, ensure equal treatment between foreign and domestic investors, and provide protection against expropriation. More recently, the Capital Market Authority, Saudi Arabia’s financial regulatory entity, has reportedly been considering removing restrictions for foreign investors when buying Saudi stocks in an effort to boost capital market liquidity.

In the UAE, both Dubai and Abu Dhabi have taken active steps to deepen their capital markets and attract a more diverse base of issuers and investors. In Dubai in late 2021, the government announced its plan to list 10 state-owned assets on the Dubai Financial Market as part of a broader push to expand the emirate’s stock market size to $816 billion. Abu Dhabi, meanwhile, has focused on strengthening investor access and benchmark visibility, with the Abu Dhabi Exchange partnering, for the first time in the region, with FTSE Russell, a subsidiary of the London Stock Exchange Group, in March 2022 to launch a locally branded benchmark index, the “FTSE ADX 15 Index” as part of a strategy to attract a wider base of international investors.

In January 2022, the UAE shifted to a Saturday-Sunday weekend, from the Friday-Saturday weekend common across the region, to align with global markets. Additionally, the Securities and Commodities Authority issued the Gulf’s first regulatory framework for special purpose acquisition companies.

For Oman, increasing private sector participation in the country’s economy is one of the main objectives of its Vision 2040. In 2022, Oman implemented the “Securities Law” to strengthen investor protection and increase participation in raising capital. In September, Muscat Clearing & Depository introduced its “Internal Regulatory Rulebook” to better align the country’s capital market with international best practices. Additionally, in November, the Muscat Stock Exchange, in cooperation with several government entities, launched the Alternative Investment Market to offer small and emerging companies a more flexible platform for public listing, supporting broader private sector involvement in capital markets.

Broader and More Diverse IPO Markets 

Saudi Aramco’s 2019 IPO initially raised $25.6 billion, however, this grew to $29.4 billion after the company exercised its “greenshoe option,” a tool that enables underwriters to sell additional shares to stabilize the share price if demand exceeds supply. The IPO became the largest in history, helping pave the way for other state-linked entities in the region to go public in the years that followed. The momentum accelerated into 2022, when Gulf states, namely Saudi Arabia and the UAE, raised $23.4 billion through IPOs, accounting for roughly 13% of global issuance. The region maintained a strong pipeline in 2023 and 2024, with Saudi Arabia, the UAE, and Oman accounting for the majority of issuance, collectively raising $10.8 billion in 2023 and $12.9 billion in 2024.  However, in the first half of 2025, Gulf markets raised $3.4 billion, reflecting a 6% year-on-year decline, likely driven by wider global market uncertainty related to unfavorable trade tariffs that led some firms to delay listings.

Source: Kamco Invest

The surge in IPO proceeds in 2022 was mainly driven by a handful of large, high-profile issuances concentrated in energy, utilities, and logistics. That year’s biggest deals included Dubai Electricity and Water Authority at $6.1 billion, ADNOC-backed Borouge at $2 billion, Abu Dhabi Ports Group at $1.1 billion, Emirates Central Cooling Systems at $724 million, Saudi Aramco’s Luberef at $1.32 billion, Power and Water Utility Company for Jubail and Yanbu at $897 million, and Arabian Drilling at $710 million.

This pattern continued into 2023, with most proceeds again coming from energy and logistics, such as ADNOC Gas at $2.5 billion and ADNOC Logistics & Services at $769 million in the UAE. In Saudi Arabia, Ades Holding Co. raised $1.2 billion, while SAL Saudi Logistics Services raised $678 million. In Oman, OQ Gas Networks SAOG raised $749 million, followed by Abraj Energy Services at $244 million.

Although energy, logistics, and utilities dominated in terms of total capital raised, the overall IPO count in 2022 and 2023 was diversified, with a growing number of smaller and medium-sized companies going public across sectors, such as consumer services, pharmaceuticals, and infrastructure. Notable listings from other sectors included Americana Restaurants at $1.8 billion, Salik at $1 billion, Nahdi Medical Co at $1.36 billion, and PureHealth at $986 million.

By 2024, IPO activity in the Gulf featured an even wider range of sectors, with most proceeds coming from outside the traditional energy, utilities, and logistics space. Some of the most prominent offerings included Talabat at $2 billion, Lulu Retail Holdings at $1.72 billion, Dr Soliman Abdel Kader Fakeeh at $763 million, Alef Education Holding PLC at $515 million, and Spinneys 1961 Holding at $375 million.

This trend seems to have continued in 2025, with Saudi Arabia’s flynass raising $1.1 billion, becoming the first airline to go public in the Gulf in nearly 20 years. Other notable listings included Dubai Residential at $584 million, Umm Al Qura for Development & Construction Company at $523 million and Almoosa Health Co. at $450 million.

Large-scale offerings in energy and logistics continued as well over 2024 and 2025, led by Oman’s OQ Exploration and Production at $2 billion, Abu Dhabi’s NMDC Energy at $877 million, and Asyad Shipping Company at $333 million.

Growing Investor Selectivity

Besides the growing participation of smaller-sized firms and a wider sectoral base in Gulf IPO markets, investor behavior in the Gulf is also evolving. This was evident in late October, when Dubai-based classifieds platform Dubbizle announced its plans to postpone its listing, despite robust IPO activity in the region. The company was expected to seek a valuation of around $2 billion through its listing, but the delay came at a time when several newly listed UAE-based firms, including Talabat Holding, Lulu Retail Holdings, and Alec Holdings PJSC, have been trading below their offer price.

This reflects a mismatch between issuer valuation expectations and investor appetite, suggesting that investors in the Gulf are becoming more selective and performance driven in their decisions, marking a notable shift from earlier years when IPO deals were often oversubscribed regardless of financial performance.

As capital markets in the Gulf continue to develop, the next phase of IPO activity will likely place greater emphasis on company performance, transparency, and sustainable earnings growth, mirroring investment behavior in more mature global markets.

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AGSI was pleased to host a discussion on the recent International Monetary Fund report “Economic Prospects and Policy Challenges in the GCC Countries.” The discussion covered the IMF’s assessment of the economic situation in the Gulf states and the outlook for 2026 as well as how fiscal, monetary, financial sector, and structural policies can best be harnessed to deliver strong, sustained, and diversified growth in the future.   

The post Looking to 2026: Economic Prospects and Policy Challenges in the GCC appeared first on AGSI.

Rare earth minerals, along with other metals, such as lithium, copper, cobalt, and nickel, are critical for the technologies driving the global transition to clean energy. They serve as core components in everything from electric vehicle batteries and wind turbines to advanced electronics and defense systems. As demand accelerates, securing reliable supply chains for critical minerals has become a top priority for countries worldwide.

In recent years, Gulf states have become increasingly focused on critical minerals as part of their economic diversification efforts, with Saudi Arabia and the United Arab Emirates playing leading roles. These states’ strategies, however, differ significantly: Saudi Arabia is building an integrated mining sector, while the UAE, Qatar, Oman, and Bahrain are adopting more selective investment approaches. These differences reflect each state’s distinct national priorities and capacities within the global critical mineral landscape.

Saudi Arabia’s Integrated Mining Sector

Mining is the “third pillar” of Saudi Arabia’s national economy under Vision 2030, playing a crucial role the kingdom’s efforts to diversify away from fossil fuels. With Saudi Arabia’s untapped mineral and mining resources valued at an estimated $2.5 trillion, the kingdom has the capacity to develop an integrated mining ecosystem by leveraging its vast domestic deposits while also using its substantial capital to expand investments in global supply chains. This ability to build a strong domestic mining base and pursue strategic opportunities abroad is what distinguishes Saudi Arabia from other Gulf states when it comes to critical minerals.

Domestically, Saudi Arabia has accelerated efforts in recent years to develop its mining sector through regulatory reforms, expanded geological surveying, and partnering with various global entities. In 2021, the kingdom passed the “Mining Investment Law” to make investment processes more efficient and investor friendly. In parallel, the Saudi Geological Survey, the country’s national geological authority, launched the “Regional Geological Survey Program” in late 2020, working with both local and foreign partners to map 230,000 square miles of the Arabian Shield to identify mineral resources and attract greater foreign participation.

These efforts have already produced tangible results. Saudi Arabia’s estimated mineral wealth rose from $1.3 trillion in 2016 to roughly $2.5 trillion in 2024, reflecting new discoveries and improved mapping techniques. Exploration activity has also expanded significantly, with investments in exploration growing from $28.4 million in 2019 to $140 million in 2024. Additionally, by 2025, foreign mining investors accounted for two thirds of the total license bidders in the country. The kingdom has further sought to capitalize on its domestic critical mineral potential through strategic partnerships with international entities, notably signing nine mineral deals, valued at $9.3 billion, in late 2024 with companies including India’s Vedanta Resources and China’s Zijin Mining Group, and, more recently, establishing a joint venture between Maaden and MP Materials to build a rare earth refinery in Saudi Arabia.

Through Manara Minerals, a joint venture between Maaden and the Public Investment Fund, Saudi Arabia has been acquiring stakes in major global mining entities. In 2023, Manara Minerals invested $2.6 billion to acquire a 10% stake in Brazil’s Vale Base Metals. In 2024, it expressed interest in investing at least $1 billion in Pakistan’s Reko Diq copper and gold project as well as up to $2 billion in First Quantum Minerals’ copper and nickel assets in Zambia, extending the kingdom’s reach across global critical mineral supply chains.

The UAE’s Global Reach

Unlike Saudi Arabia’s resource-rich landscape, the UAE has limited domestic critical mineral reserves. So, Abu Dhabi has centered its strategy on investing in critical mineral projects globally, notably in Africa. In 2023, the UAE, through International Resources Holding, invested $1.1 billion to acquire a 51% stake in Mopani Copper Mines in Zambia. Most recently, International Resources Holding acquired a 56% majority stake in Alphamin Resources for $366 million, giving it access to the Bisie tin complex in the Democratic Republic of Congo. Additionally, in 2024, International Resources Holding formed joint ventures for iron ore mining in Angola and announced that it was in advanced talks to potentially acquire mines in Burundi, Kenya, and Tanzania.

Beyond Africa, the UAE is expanding its global footprint through various large-scale partnerships, namely with the United States. In January, Abu Dhabi’s ADQ, with Orion Resource Partners, a U.S.-based global investment firm specializing in metals and materials, created a 50/50 joint venture based in Abu Dhabi with a $1.2 billion commitment to invest in mining companies in Africa, Asia, and Latin America. Additionally, in October, a broader fund, Orion Critical Mineral Consortium, was established by the U.S. International Development Finance Corporation, Orion Resource Partners, and ADQ with an initial funding commitment of $1.8 billion and a plan to expand to $5 billion. The consortium’s goal is to invest in existing or near-term producing assets, further underscoring the UAE’s emphasis on gaining strategic exposure to global critical mineral assets.

Qatar, Oman, and Bahrain

Qatar’s distinct critical mineral investment strategy is more conservative than that of the UAE. Through its sovereign wealth fund, the Qatar Investment Authority, Qatar’s approach is focused on gaining financial exposure by acquiring stakes in well-established critical mineral companies rather than investing directly in mines. In 2024, QIA invested $180 million in Dublin-based TechMet, and, more recently, it invested $500 million in Canada’s Ivanhoe Mines through a private placement. This targeted approach gives Qatar exposure to the critical mineral sector while avoiding the operational risks associated with running mining projects.

In Oman, mining has been designated a strategic sector under Oman Vision 2040. Oman’s investment strategy in critical minerals is grounded in domestic development but at a much smaller scale than Saudi Arabia’s, given its smaller resource base. The country advances its exploration and investment agenda through the Ministry of Energy and Minerals and state-backed Minerals Development Oman.

Oman’s ophiolite-rich mountains are believed to host a wide range of metals, including chromite, cobalt, copper, and nickel. The country was also the first in the Gulf to produce and export ferrochrome. In 2023, the Ministry of Energy and Minerals signed an agreement with United Kingdom-based Knights Bay to extract nickel, Oman’s first mining agreement with a foreign investor. In January, Minerals Development Oman exported copper concentrates from its Lasail mine for the first time and plans to start production at Al Baydha copper mine in the years ahead. More recently, the Ministry of Energy and Minerals signed three mining exploration agreements valued at $500 million and signed a memorandum of understanding with Turkey’s Ministry of Energy and Natural Resources to enhance cooperation on critical mineral exploration.

Bahrain has also been trying to enter the critical mineral space, despite its small size and limited resource base. In September, Bahrain became the first Middle Eastern country to sponsor a deep-sea mining permit after backing California-based Impossible Metals’ bid to explore part of the Pacific Ocean. Although Bahrain has not made any financial commitments, Impossible Metals CEO Oliver Gunasekara noted that Bahrain could potentially fund a refinery in the future. While Bahrain’s initiatives remain extremely limited compared to those of other Gulf states, recent moves suggest a desire not to be left behind in the global critical mineral race.

The Gulf states are increasingly active in critical minerals, hoping to capitalize on their resources and strategic investments to prepare for a post-hydrocarbon economy. However, their different approaches reflect each state’s distinct resource capacities, national priorities, and ambitions.

The post Diverging Paths: Gulf Critical Mineral Strategies appeared first on AGSI.

Fiscal Outlook

The Ministry of Finance estimates that the 2026 fiscal deficit will narrow to 165 billion riyals ($44 billion; 3.3% of gross domestic product) from 245 billion riyals ($65 billion; 5.3% of GDP) in 2025. This is based on a 5.1% increase in revenue and a 1.7% decline in spending relative to 2025. The fiscal deficit is expected to narrow further to 125 billion riyals (2.2% of GDP) by 2028.

The assumptions made on oil prices, oil production, and oil revenue are not disclosed. However, if it is assumed that oil production averages 10.1 million barrels per day in 2026 (consistent with current OPEC+ production plans) and that the dividend paid by Saudi Aramco to its shareholders increases by 5%, the assumed oil price in the budget is likely around $72 per barrel. Oil revenue would then be 4.5% higher in 2026 than in 2025. Non-oil tax revenue is budgeted to increase by 5% in 2026, which is reasonable given the growth prospects for the economy.

The projected decline in spending in 2026 is due to lower outlays on goods and services and investment projects, which more than offset higher spending on wages and salaries. Spending, however, usually exceeds the budget estimate, and while such overruns have been reduced in recent years, spending was still 4% higher than budgeted in 2025. Given this history, it is unlikely that spending will be lower in 2026 than in 2025.

In terms of financing, the budget notes that the government will use domestic and external financing through public and private channels in 2026 and will also expand its use of alternative funding sources, including project financing and export credits. Government debt is seen rising to 32.7% of GDP in 2026 from 31.7% of GDP in 2025.

Oil to Determine Budget Path

The Saudi government has made significant progress in broadening its revenue sources in recent years. Non-oil revenue now accounts for 46% of total government revenue. Nevertheless, oil revenue remains the key driver of the budget. Unfortunately, this revenue is inherently difficult to forecast because of the volatility of the global oil market and the uncertainty about Aramco’s future dividend policy.

Whether the 2026 budget numbers look reasonable largely depends on the path of the global oil market. The budget appears to take a relatively optimistic view on the oil market outlook, consistent with OPEC’s well-established position that the demand for oil remains robust. However, if oil prices were to average $65/bbl in 2026, oil revenue would be around 40 billion riyals (about $10 billion) lower than in the budget. If this were combined with a spending overrun, relative to the budget, of 4% (same as in 2025), the fiscal deficit in 2026 would be around 260 billion riyals ($69 billion; 5.2% of GDP), little changed from 2025.

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One closely watched dimension of the crown prince’s visit involved Saudi-U.S. technology collaboration, especially in the AI domain. Major bilateral AI agreements announced during President Donald J. Trump’s May visit to the Gulf had not progressed as quickly as anticipated. Slow progress was attributed to various complicating factors, such as China’s role in the region and bureaucratic resistance within the U.S. government.

Regional officials and other observers nevertheless remained hopeful that tech collaboration would get back on track. In October, there were signs of movement on Gulf-U.S. AI collaboration – namely reports of U.S. approvals for chip exports to U.S. customers in the United Arab Emirates. However, clear and publicly available details were lacking.

This November visit appears to have jumpstarted AI cooperation. On November 18, the associated White House fact sheet referred to the signing of “a landmark AI Memorandum of Understanding that gives the Kingdom access to world-leading American systems while protecting U.S. technology from foreign influence, ensuring that American innovators will shape the future of global AI.” The following day, the Saudi Minister of Foreign Affairs Prince Faisal bin Farhan and Secretary of State Marco Rubio signed a Strategic Artificial Intelligence Partnership, noting that it “encompasses the supply of advanced semiconductors.”

The lofty wording of the readouts could lead some observers to think that this trip involved more agreements to make agreements than hashing out the nitty-gritty details needed for deeper AI collaboration.

Yet new and concrete details did emerge alongside this visit. The U.S. Commerce Department authorized the exportation of advanced chips to both HUMAIN, the Saudi technology firm backed by the Public Investment Fund, and the UAE’s G42. The two companies secured “approvals to purchase the equivalent of up to 35,000 Nvidia Blackwell chips (GB300s),” provided the companies meet “rigorous security and reporting requirements.”

Such details matter to Gulf governments, which are keen to develop indigenous AI capabilities with the best available chips. While Gulf officials welcomed past developments like the Trump administration’s AI Action Plan, and the UAE indicated a readiness to “fast track” the strategic AI partnership with the United States, chip allotments for their national tech champions remain among Gulf states’ top concerns.

Following the Commerce Department’s announcement on chip approvals for G42 and HUMAIN, the UAE Embassy released a statement saying the move marked “another milestone in the trusted and enduring partnership” with the United States on advanced technology. Indeed, U.S.-UAE tech collaboration is an established, deep, and promising area of ties.

Past official visits between Washington and Abu Dhabi signaled alignment and the scale of future collaboration, but the outcomes were lighter on critical, actionable details. A March trip to Washington by Tahnoun bin Zayed al-Nahyan, UAE national security advisor, “covered prospects for investment in key sectors,” which included AI. Trump’s subsequent May trip to the Gulf resulted in the establishment of the U.S.-UAE AI Acceleration Partnership. Given this November’s developments, the trendline of U.S.-UAE technology cooperation remains positive.

Mid-November was nevertheless a tough time to compete with what many in Washington labeled “Saudi week.” For its part, Saudi Arabia’s HUMAIN made a major commercial splash around the crown prince’s visit. The Saudi AI company announced deals and partnerships with xAI, Luma, AMD, and Cisco. Amazon Web Services and HUMAIN agreed to expand their partnership and work jointly on an “AI Zone” in Riyadh.

Another deal on critical minerals – crucial elements in the supply chains of strategic industries such as AI – also contained concrete details, suggesting that U.S.-Saudi strategic cooperation is accelerating beyond government-to-government rhetoric. As part of a new Critical Minerals Framework, Riyadh and Washington agreed to form a joint venture to build a rare earth refinery in Saudi Arabia. The Pentagon and MP Materials will hold 49% of the joint venture, with the Saudi state-owned mining company Maadan holding the remainder of the new initiative.

To be sure, many more details need ironing out concerning AI cooperation going forward. A major question is whether a precise, longer-term schedule of advanced chip exports was agreed upon behind closed doors. Or did this committed allotment for HUMAIN and G42 serve as a smaller gesture by the United States intended to preserve leverage?

These are still early days. Gulf governments will seek more advanced chips for both U.S. customers and national tech firms. With regional AI ambitions unlikely to slow any time soon, evolving Gulf partnerships with the U.S. government and businesses will remain crucial components of this fast-moving domain.

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The U.S.-Saudi Trade and Investment Relationship

Trade links between the two countries have always been more important for Saudi Arabia than the United States given the difference in economic size, although Saudi oil exports have at times played an outsized role in the bilateral relationship.

Over the past two decades, however, the importance of bilateral trade links has declined for both countries. As recently as the 2000s, 18% of Saudi exports (mostly oil) went to the United States, and 15% of imports came from the United States. Meanwhile 1% of the United States’ exports went to Saudi Arabia, and 2.2% of its imports came from the kingdom. Saudi Arabia ran a trade surplus (on goods and services) with the United States that averaged $16 billion per year in the 2000s.

Source: Bureau of Economic Analysis
Note: 2025 data is the sum of the four quarters to 2025Q2.

The trade relationship began to change in the early 2010s. Saudi Arabia’s exports to the United States slumped as U.S. oil production surged. By 2024, only 4.2% of Saudi exports went to the United States, and 8.4% of its imports were sourced there. To replace the United States as a trade partner, the kingdom looked to Asia. China now accounts for 15% of Saudi exports and is the source of nearly one-quarter of its imports. From the U.S. side, the share of imports from Saudi Arabia dropped to only 0.4% in 2024, and the share of its exports going to Saudi Arabia declined to 0.8%. The trade balance between the two countries swung into a U.S. surplus ($10 billion in 2024).

The financial relationship between the two countries has also evolved. At the end of 2011 (the first year for which data is available), Saudi investments in U.S. bonds and listed equities accounted for 17% of Saudi foreign financial assets (in reality, this is likely an underestimate, as assets could be held through companies incorporated in third countries, such as Luxembourg). These holdings were only a small fraction (1.2%) of total foreign holdings of U.S. securities. In 2024, the share of Saudi foreign financial assets invested in U.S. bonds and listed equities had risen to 23% but accounted for 1.1% of total foreign holdings of U.S. securities. The composition of the investments has also changed. Equities accounted for over 60% of Saudi holdings of U.S. securities in 2024 compared to 39% in 2011. This switch from bonds to equities started in 2020 and was spurred by the growing role of the PIF in managing foreign assets and the related desire to increase the risk-return profile of the country’s investments. For example, $40 billion of the central bank’s foreign currency reserves (which were likely heavily invested in U.S. Treasuries) was transferred to the PIF in early 2020.

Source: Treasury Information Capital System

Trade and Investment Deals in the News

The most notable recent investment by Saudi Arabia in the United States is the leveraged buy-out of EA Sports by the PIF and two partners (Silver Lake and Affinity Partners) that valued the company at $55 billion. The investment is aligned with the kingdom’s focus on developing its entertainment and technology sectors. The PIF already owned around 10% of EA Sports, and the acquisition of the remainder of the company will be financed by a $20 billion loan and additional capital supplied by the PIF and its partners. While the final ownership structure is not clear, the transaction will result in a sizeable new investment in the United States by Saudi Arabia.

On the trade side, Saudi Arabia is reported to have requested to buy 48 F-35 fighter jets from the United States as part of the $142 billion defense sales agreement signed in May. The sale of computer chips, gas turbines, and related technologies and the provision of construction services are other important and expanding areas of U.S. exports to Saudi Arabia.

Several large investments by U.S. companies in Saudi Arabia have been announced. An $11 billion deal involving the lease and leaseback of Aramco’s Jafurah gas processing facilities by a consortium of investors led by Global Infrastructure Partners, a part of BlackRock, was finalized in late October. HUMAIN, a newly created Saudi AI company, announced a $3 billion deal with AirTrunk (backed by Blackstone) to build data centers in the kingdom. There have also been deals with AWS ($5.3 billion), Google Cloud (joint investment with the PIF of $10 billion), Equinix ($1 billion), and Salesforce ($500 million). U.S. companies are heavily involved in developing the tourism sector (Hilton recently announced that it has over 100 hotels operating or in the pipeline in Saudi Arabia with a total investment of $8 billion) and the asset management sector (Templeton and Neuberger Berman).

Recent Data Suggests Economic Links Are Growing

There are some signs that trade and investment ties between the United States and Saudi Arabia are strengthening as the strategic economic priorities of the two countries align, although this can only be a tentative conclusion at this stage. U.S. exports to Saudi Arabia grew by 14.2% year over year in the second quarter of 2025 according to U.S. data (for goods and services) and by 11.7% according to Saudi data (only for goods), although based on partial data these exports may have stagnated in the third quarter. U.S. imports from Saudi Arabia, however, fell by 30% year over year in the second quarter at least partly because of weak chemical prices. As a result of these trends, the U.S. surplus on goods and services trade with Saudi Arabia reached an all-time high of $4.5 billion in the second quarter of 2025.

Turning to investment, the United States was the largest provider of foreign direct investment to Saudi Arabia in 2024. Although this amounted to only $2.8 billion, this was the highest annual net inflow since 2016 (first year data is available). While no official data is yet available for 2025, research by Emirates NDB indicates that the United States was the largest source of “greenfield” FDI (investment to establish a new company rather than to take over an existing one) in Saudi Arabia in the first half of 2025.

The value of Saudi investments in listed U.S. securities, however, has not changed over the past year (through July), remaining at around $335 billion. Valuation gains on equity holdings have been offset by the sale of both Treasuries and equities. The value of the PIF’s holdings of U.S. equities increased to $23 billion in the second quarter of 2025 from $20 billion a year earlier.

Crown Prince Visit Should Spur More Deals

The economic and financial relationship between the United States and Saudi Arabia will strengthen given the needs of the two countries and the close relationship between Trump and Mohammed bin Salman. The United States wants Saudi Arabia to purchase more of its goods and services and increase investments in U.S. companies, and Saudi Arabia is seeking greater access to U.S. tech and innovation to support its ambitious Vision 2030 reforms. The U.S.-Saudi Investment Forum scheduled for November 19 will be an opportunity to seal more economic deals between the two countries.

During Trump’s May visit to Riyadh, Saudi Arabia made a $600 billion trade and investment commitment to the United States. While this target will be difficult to reach if oil prices stay at current levels, there is little doubt that Saudi investments and purchases of U.S. products will increase. However, it may be that U.S. investments into Saudi Arabia see the strongest growth in the coming years given the improved investment climate in the kingdom, opportunities provided by Vision 2030, and availability of reliable low-cost energy and abundant land to support the expansion of AI and related activities of U.S. tech companies.

The post The Ties That Bind: The U.S.-Saudi Trade and Investment Relationship appeared first on AGSI.

Robert Mogielnicki

When Crown Prince Mohammed bin Salman arrives in Washington, both the Saudi delegation and White House will have commercial deals on their mind, but not for all the same reasons. Earlier in the year, the Saudi government made a $600-billion commitment to invest in the United States, though details were fuzzy. The subsequent announcement by the White House highlighted energy, mining (including critical minerals), defense, infrastructure, health, and technology as sectoral priorities for deeper economic ties. Artificial intelligence is likely to be a key locus of economic collaboration. Advanced AI chips from U.S. chipmakers are critical inputs for Saudi Arabia’s ambitious tech agenda and nascent tech companies, such as HUMAIN.

Saudi investors – including the Public Investment Fund, government-related entities, and private businesspeople – remain keenly interested in a broad range of U.S. assets and investment opportunities. Sports and gaming reflect another promising area of investment collaboration: The PIF helped lead a $55 billion buyout of Electronic Arts in September. These synergies will be useful for maintaining strong working relations with the administration of President Donald J. Trump. Yet the Saudi government ultimately seeks two-way investment flows that simultaneously support Saudi Arabia’s economy. The sovereign wealth fund, for example, has demonstrated a propensity for deploying capital into sectors and companies that not only present a high likelihood of return but also domestic dividends.

Mohammed bin Salman’s visit to Washington and the associated investment expectations come at a moment when smart spending is a top priority for Riyadh. While Saudi Arabia has been able to hike its oil production levels over recent months, lower oil prices nevertheless impose some fiscal constraints on the ambitious and expensive economic and social transformation. Saudi Arabia’s third-quarter deficit widened to $23.6 billion, marking a 160% increase over the previous quarter. Short-term oil price forecasts suggest spending recalibrations will be necessary for the foreseeable future.

There are also growing economic needs across the wider Middle East: Egypt, Syria, Lebanon, and Gaza are looking toward the Gulf countries, especially Saudi Arabia, for economic support. Riyadh would like to translate calls for support into compelling investment opportunities, but the price of facilitating a stabler region may not necessarily entail a substantial, direct return on investment. And other developed and emerging economies lie on Saudi Arabia’s international investment horizon. Following Trump’s May trip to the Gulf, the PIF opened a subsidiary company office in Paris. The U.S. economy remains a top destination for Saudi investments, but Saudi and U.S. officials will need to figure out how a juggling act involving deals valued at hundreds of billions of dollars can work for both governments and their key audiences.

Redefining the U.S. Security Role

Hussein Ibish

Saudi Arabia has long sought a formula for clarifying the regional security role of the large-scale U.S. military facilities in the Gulf region, especially the significant air base in Qatar and naval headquarters in Bahrain. Saudi Arabia and other Gulf countries have lost any reliable metric for predicting when and if the extensive U.S. force posture in their region will be used to augment their defense and respond to attacks against them. The 1980 Carter Doctrine technically remains in effect, but it addresses 20th century security nightmares, best exemplified by the Iraqi invasion of Kuwait, rather than 21st century nightmares that involve sudden and deniable attacks (potentially by unknown actors), drone strikes, missile attacks, piracy and sabotage at sea, terrorism, and hostile actions by nonstate militia groups. A number of key inflection points have underlined doubts by Saudi Arabia and its Gulf Arab allies about the reliability of U.S. security guarantees, particularly the attacks on Saudi Aramco facilities in September 2019, the deadly drone attacks in Abu Dhabi in January 2022, and, most recently, Israel’s September airstrike in Qatar that targeted Hamas negotiators in a civilian building in Doha.

Saudi Arabia and the administration of former President Joseph R. Biden Jr. reportedly came close to finalizing the text of a new mutual defense agreement based on the U.S. treaty with Japan from the early 1950s, augmented by a new strategic alignment understanding. Both were aspirationally linked to Saudi Arabia’s normalization of ties with Israel, which would, in turn, facilitate Senate ratification of such an agreement.

Unfortunately, those negotiations were derailed by the Gaza war following the October 7, 2023 Hamas-led attack on southern Israel. Both Saudi Arabia and the administration of Donald J. Trump have sought to revive the conversation, but Saudi Arabia now requires Israel to take clear and irreversible steps toward Palestinian statehood, while the Israeli consensus against any moves toward Palestinian independence has become much stronger and more broad based. There is, therefore, seemingly little room to maneuver toward a formalized, Senate-ratified treaty or set of treaties, addressing Saudi concerns about U.S. military and security guarantees. However, there does appear to be significant political and diplomatic space for a new understanding based on an executive order as was provided to Qatar following Israel’s September 9 airstrike in Doha. Trump’s September 29 executive order “Assuring the Security of the State of Qatar,” holds that “any armed attack” against Qatar will be regarded “as a threat to the peace and security of the United States.” It continues, “In the event of such an attack, the United States shall take all lawful and appropriate measures – including diplomatic, economic and, if necessary, military to defend the interests of the United States and of the State of Qatar and to restore peace and stability.”

From the Saudi perspective, such assurances seem helpful and warranted, even though they would not be anchored in Senate ratification and would exist only in the form of a relatively fragile executive order. But Saudis can see no reason why their country would not be as deserving of such reassurances as Qatar, and, since September 29, they have been exploring ways to ensure that this level of reassurance be extended to themselves.

There appears to be a strong possibility that one of the key deliverables from the visit of Saudi Crown Prince Mohammed bin Salman to Washington will be such an executive order that provides analogous or comparable levels of security commitment to Saudi Arabia. The two countries would then seek to build on this executive order, looking for opportunities to secure Saudi normalization with Israel, assuming there remains no plausible alternative route to Senate ratification of a full new mutual defense treaty.

Not the Time for Israel Normalization

Kristin Smith Diwan

When Saudi Crown Prince Mohammed bin Salman meets with President Donald J. Trump in the Oval Office on November 18, there is one question that is sure to be raised by the U.S. president: Will Saudi Arabia join the Abraham Accords and normalize relations with Israel? He is unlikely to get an affirmative answer.

Under President Joseph R. Biden Jr., the Saudi leadership had been contemplating warming ties with Israel in exchange for security guarantees from the United States. Its approach to Israel changed substantially with the Gaza war. With the refusal of the government of Israeli Prime Minister Benjamin Netanyahu to countenance a pathway toward Palestinian independence hardening post October 7, 2023, Saudi Arabia pivoted toward creating an international coalition among Islamic states and Europe to immediately recognize a Palestinian state and take practical steps toward its realization. Negotiations for a U.S.-Saudi security agreement now advance on their own terms.

Trump and Mohammed bin Salman will likely discuss the situation in Gaza, but this will be in the context of the 20-point Trump peace plan. Advancing that complex agreement now involves a wide collection of stakeholders, including Qatar and Turkey as Hamas guarantors and Egypt as broker with the United Arab Emirates, Jordan, and multiple Islamic countries contemplating a role in a temporary international stabilization force. The United Nations will have to provide a legal framework for such a force’s entry. These are not things that Saudi Arabia can deliver alone.

Saudi Arabia has played a valuable role in assembling a broad international coalition keeping the Palestinian state as an endgame, notably through the U.N.-sponsored New York Declaration. Keeping this alive under both the Trump peace plan and the New York declaration now requires advancing two formidable tasks: the disarmament of Hamas and the reform of the Palestinian Authority in preparation for a role in Gaza. The time for Saudi Arabia to offer its carrot of diplomatic ties to Israel may yet come but not today.

Mining for a Nuclear Energy Deal

Hussein Ibish

For several years, Washington and Riyadh have been seeking a formalized arrangement for U.S. nuclear technology transfer that would assist Saudi Arabia in developing a new civilian nuclear energy program. Under the administration of President Joseph R. Biden Jr., this agenda was largely bundled together with the potential new mutual defense and strategic alignment agreements, with Saudi Arabia also undertaking to normalize relations with Israel to win approval for a treaty in the Senate. As with the other agreements, nuclear negotiations were upended by the war in Gaza, with talks suspended for months. During the second administration of President Donald J. Trump, these discussions have also been revived.

The complexity of these negotiations centers around the ever-vexed question of enrichment. Saudi Arabia maintains – although with increasing outside skepticism – that it possesses large amounts of domestic uranium that it could mine and then refine into yellowcake. Saudi Arabia would use that primarily as fuel for domestic energy consumption, which is now driven almost entirely by burning gas and oil that could be, according to Saudi officials, more productively sold overseas. In theory, Saudi Arabia could increasingly rely on energy produced by its own uranium deposits and reserve its oil and gas for sales, bolstering the Saudi economy. Traditionally, the United States requires nuclear energy partners to submit to a 123 nuclear cooperation agreement, which the Saudis regard as incompatible with the economic logic of their proposed domestic nuclear energy program. U.S. Energy Secretary Chris Wright has spoken positively about the potential for an alternative agreement, which would also be independent of Saudi normalization with Israel. It would ensure U.S. oversight of the Saudi nuclear program, particularly considering repeated statements by Saudi officials that the kingdom might seek an independent nuclear deterrent if Iran develops nuclear weapons, and secure lucrative contracts for U.S. firms as opposed to those from Russia, China, South Korea, or elsewhere. Given the mercantile attitude of the Trump administration, and the likely cooperation of Republicans in Congress, such a deal is entirely plausible during the coming Saudi visit to Washington.

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Climate Risks: Insurance as Frontline Adaptation

The United Arab Emirates’ record floods in April 2024, which Swiss Re Group estimated caused insured losses exceeding $1.6 billion, exposed the vulnerability of Gulf infrastructure to climate volatility. Munich Re’s July NatCat report warned that climate-driven perils in the Middle East are rising faster than previously modeled. Saudi Arabia’s megaprojects, such as Neom and Qiddiya, face especially high risks. Storm surges, water scarcity, and extreme heat events directly affect project viability, insurance pricing, and investor appetite.

With adaptation strategies still evolving, insurers are repricing risk in real time. When premiums rise after each flood or sandstorm, boards and financiers are forced to confront climate resilience as a core business issue. Companies that elevate data centers, adopt water-efficient design, or harden supply chains can cut costs and secure coverage, while those that delay risk becoming uninsurable. Insurance has become not simply a financial buffer but the frontline mechanism of climate adaptation.

Governance as a Financial Variable

Corporate governance is just as decisive as emissions targets in shaping the Gulf’s energy and infrastructure sectors, yet it often receives far less attention. In Saudi Arabia, weak corporate governance practices, such as unclear contract enforcement and inadequate oversight of large infrastructure projects, have led to frequent contractor disputes and costly arbitration cases. In the UAE, governance lapses in the banking sector, including failures in compliance and risk management, have strained relationships with international partners. Across the region, litigation costs linked to poor governance and contract mismanagement have become so significant that some investors now view governance risks as a distinct investment category.

Insurers are beginning to reframe this landscape. Underwriters that assess procurement transparency, dispute-resolution frameworks, and anti-money-laundering compliance are effectively pricing governance into capital markets. Lloyd’s of London has piloted governance-linked coverage in emerging markets, and Gulf reinsurers are starting to align with those practices. Governance is no longer an abstract corporate aspiration; it is a determinant of credit risk, solvency, and access to international pools of capital.

The “S” Is Not Silent

Labor conditions remain one of the weakest points in the Gulf’s ESG record. Housing, recruitment fees, and worker safety standards vary widely. If insurers were to factor labor welfare more directly into underwriting decisions, companies with stronger social practices could, in theory, benefit from lower premiums, while those that fall short might face higher costs. By embedding social risk into premiums, insurers could create immediate, credible incentives for reform.

Regulation and Market Signals

The regulatory backdrop reinforces this opportunity. In April, the European Union passed the “Stop-the-Clock” directive, delaying implementation of the Corporate Sustainability Reporting directive for up to three years. The pause highlights how political compromise can blunt regulatory ambition. By contrast, Gulf regulators are pushing ahead.

Oman’s Muscat Stock Exchange has mandated ESG disclosure for all listed companies since January. The Qatar Financial Centre has introduced new sustainability reporting requirements to align firms with global standards and attract responsible investment. Saudi Arabia’s Capital Market Authority has issued guidance for green and sustainability-linked debt. Even so, disclosure rules across the Gulf remain uneven, with significant variation in enforcement capacity.

In this environment, insurance offers a sharper tool. Premiums rise or fall with actual risk not with shifting political calendars. For global investors, that market-based signal is often more credible than regulatory timetables.

The Hidden Hand of Reinsurance

Reinsurance is the Gulf’s invisible hand. Local insurers pass much of their risk to global giants, such as Swiss Re, Munich Re, and Lloyd’s, which means international standards set the tone for regional underwriting. Facing rising catastrophe losses, reinsurers are tightening terms and holding firm on pricing. When they demand stronger climate safeguards or governance standards, Gulf insurers follow. The ripple effect is clear: Higher premiums shape project finance costs, debt pricing, and ultimately how investors judge Gulf Islamic and infrastructure bonds.

Lessons From Abroad

Elsewhere, insurers have already reshaped markets. In the United Kingdom, the Flood Re scheme links affordable coverage to public investment in flood defenses and encourages property-level resilience through the Build Back Better program. Insurance costs in flood-prone areas are now calibrated to whether resilience measures are in place.

In the United States, California’s escalating wildfire risk has forced major insurers, such as State Farm and Allstate, to halt new policies or raise premiums, effectively pricing climate inaction into the housing market and shifting billions in costs to homeowners and governments.

The Gulf can learn from these examples and leapfrog, embedding environmental resilience, social safeguards, and governance rigor directly into underwriting. Such a model would not only strengthen local markets but also align with the expectations of global investors increasingly focused on the credibility of ESG claims. For example, in May Qatar Insurance secured a provisional MSCI “AAA” ESG rating – the first insurer in the Middle East and North Africa to reach that level. The company built its bid on strong board oversight, integrated climate risk protocols, and rigorous governance structures. That achievement shows how a Gulf insurer can compete on global ESG terms, turning governance from an aspirational concept into a measurable standard that influences underwriting and capital flows.

The Investment Stakes

Between 2020 and 2024, Gulf states invested more than $130 billion in green projects abroad but attracted only about $24 billion in inbound green foreign direct investment. The imbalance reflects not a lack of ambition but a lack of trust. International investors need assurance that climate risks, governance failures, and compliance gaps will be managed with the same rigor they expect in Europe or Asia.

If insurers embed ESG criteria into underwriting, they create that trust. Disclosure becomes discipline, directly linking sustainability to borrowing costs. For sovereign wealth funds, project developers, and foreign investors alike the signal is powerful: Projects that fail climate or governance tests quickly lose financing, while those that exceed expectations gain an edge in attracting capital.

From Backstop to Market Shaper

The Gulf has an opening to redefine the role of insurance from a passive risk absorber into an active market shaper. By embedding ESG criteria into underwriting, insurers can set the benchmarks that will guide investment for decades. This shift would not only protect balance sheets but also enforce the standards needed to make sustainable growth credible.

Crucially, an insurance-led approach to ESG would reinforce national strategies, such as Saudi Arabia’s Vision 2030, the UAE’s Net Zero 2050, and Qatar’s drive to be a sustainable finance hub, linking project risk directly to long-term policy goals.

For ESG, insurance is a market force that can turn ambition into trust and trust into capital.

The post Insuring ESG: Why the Gulf’s Financial Future Depends on Risk Pricing appeared first on AGSI.