Finance Desk

Strong foreign reserves and new export routes help GCC economies weather the US-Iran conflict.

This article appears in the November issue of Global Finance Magazine.

For Iran’s neighbors in the Persian Gulf, proximity to the Islamic Republic has long meant geopolitical uncertainty.

Those concerns intensified in late February after U.S. and Israeli attacks on Iran triggered a conflict that effectively closed the Strait of Hormuz to normal commercial shipping. The strait normally carries about a fifth of global oil consumption.

The disruption threatened a major revenue source for Gulf states, raising concerns about pressure on their foreign exchange reserves.The disruption threatened a major source of revenue for Gulf states, raising concerns about pressure on their foreign exchange reserves.

Thus far, however, the region has demonstrated greater financial resilience than many thought possible.

The six Gulf Cooperation Council states entered the conflict with substantial foreign exchange reserves, which provided a buffer against lost oil revenues and higher costs.

“Foreign reserves have been more resilient than initially feared,” said Said Bakr, a research associate in political economy at the Arab Gulf States Institute. The region entered the conflict with substantial financial buffers, while rising crude prices have offset a decline in export volumes.

Finding New Routes

Iran’s disruption of the Strait of Hormuz and attacks by Yemen’s Houthi rebels near the Bab el-Mandeb Strait have forced Gulf oil exporters to seek alternative routes to international markets. Saudi Arabia continues to reroute crude through its East-West Pipeline to the Red Sea port of Yanbu after a temporary shutdown caused by a September drone attack. The UAE has relied on its Habshan-Fujairah pipeline, which carries oil to the Gulf of Oman, bypassing the Strait of Hormuz. Shipping has also been rerouted to Africa, where ports in countries like South Africa along the coast have benefited greatly.

The continued export of crude, albeit at lower volumes, coupled with prices rising from an average of $66 per barrel in January to over $100 in September, has been instrumental in sustaining Gulf-state revenues. Earnings from non-oil sectors are also booming as the Gulf Cooperation Council states diversify their economies.

All this has combined to keep their FX reserves resilient. Saudi Arabia’s reserves have increased to 1.82 trillion Saudi riyals ($485.3 billion) in August from 1.78 trillion riyals ($474.6 billion) in January. The UAE reserves have remained relatively stable, ending the second quarter at 931.4 billion dirhams ($253.6 billion). 

“The war and the Strait closure will impact the flow and direction of reserves but will not structurally dent the comparative advantage of the Gulf states,” said Bader Al-Saif, assistant professor at Kuwait University and associate fellow at Chatham House. Thus far, stable reserves have helped them maintain currency stability, meet trade obligations, and avoid disruptive measures like sharp spending cuts. Large sovereign wealth assets have provided additional buffers.

However, not all Gulf states have maintained positive flows. In Bahrain, servicing high government debt and a widening budget deficit pushed reserves down to $3.9 billion in June, down from $7.1 billion in February.

John Nijraini is a contributing writer based in Kenya.

Romania has great tech and is the region’s top energy producer, yet it’s mired in an economic slump.

This article appears in the November issue of Global Finance Magazine.

For investors, southeastern Europe’s largest and most diversified country remains a mystery. 

Renowned for its potential, Romania boasts a thriving information, communications, and technology sector; unicorn start-ups such as automation software company UiPath; and regional stars like OMV Petrom, the region’s largest energy producer; renewables producer Hidroelectrica; and Automobile Dacia. But development has gone badly off track, making Romania an outlier to the region’s upbeat picture.

Romania recorded negative growth of 0.8% in the first half of 2026, down from just 0.7% for all of last year, according to the latest Regional Economics Survey from the European Bank for Reconstruction and Development. The fiscal deficit, the current account deficit, and inflation remain either the highest or among the highest in the EU. 

A dramatic drop in foreign direct investment inflows, from €3.4 billion ($3.82 billion) in the first half of 2025 to just €527 million in the first half of this year, suggests difficulty in covering a predicted 2026 current deficit of €14.2 billion, leaving Romania heavily dependent on EU fund inflows, which have increased 32.5% year-over-year to €5.16 billion. 

What Went Wrong?

Romanians are being hit by steep hikes in energy and food prices and persistently high inflation. But much of the blame for the country’s failure to address these problems lies with its fractured, ineffectual political class, which has blocked attempts by successive coalition governments to control spending and carry out structural reforms. 

Romania has been without a government since May 5, when one of Prime Minister Ilie Bolojan’s coalition partners, the Social Democrats, sided with the far-right Alliance for the Union of Romanians to block a package of spending cuts intended to address a rising budget deficit. Since then, Bolojan has been unable to pass a budget or form a new government, causing the Romanian leu to depreciate and dramatically boosting inflation and borrowing costs. 

“Romania’s political class is doing what Italy’s did in the late 20th century, ramping up spending and debt to unsustainable levels,” said Charles Robertson, head of Macro Strategy at consultancy FIM Partners. “Bond markets now price Romania as a junk bond country, although the rating agencies have it just inside investment grade, all with a negative outlook.” 

In its last review, on July 31, Fitch Ratings affirmed Romania at BBB- Negative, citing “deteriorating public finances due to large, albeit declining, fiscal deficits and rising government debt/GDP.” 

Malgorzata Krzywicka, director on Fitch Ratings’ Emerging Europe Sovereign team, expects Romania’s economy to contract by 0.6% this year, bringing average real GDP growth to just 0.3% in 2024-26, compared with 4.7% in 2015-19. Potential growth has fallen from about 3.5% before the pandemic to closer to 2%. 

“The key challenge,” she said, “is whether private investment and recent structural reforms can offset these trends as EU funding gradually normalizes from recent peaks and public investment becomes a less powerful growth driver.”

Can Confidence Be Restored? 

Yes, but Romania’s political class must get its act together, said Radu Cracan, regional, policy & strategy economist at the EBRD.

“We strongly advocate for better and more reliable governance, more targeted and private sector-facing economic policymaking, more innovation, and better skills and human capital,” he said. “Ensuring a predictable regulatory and fiscal environment will be critical for foreign investor confidence.”

That’s a tall order for a country that has long puzzled investors by failing to make progress on these fronts. 

Nic Wirtz is a contributing writer based in Guatemala.