Magazine

Saudi Arabia’s IPO market is entering a more mature phase as listings surge and foreign investor engagement grows. But can it weather the crisis in the Gulf?

Saudi Arabia has established itself as the Gulf region’s most consistent destination for new corporate listings. While other regional exchanges occasionally produce blockbuster transactions, the kingdom has distinguished itself through a steady pipeline of offerings across sectors and company sizes.

Last year, Saudi Arabia hosted 37 of the Gulf Cooperation Council’s 42 IPOs, through both the Saudi Stock Exchange’s Main Market and Nomu (a parallel market), according to Kuwait-based Kamco Invest. Nomu accounted for 24 listings while the Main Market saw 13 deals. Despite a slight dip in deal flow from 2024, total proceeds reached $4.2 billion. As a result, the kingdom overtook the United Arab Emirates as the region’s leading IPO market.

As in other emerging economies, Saudi Arabia’s capital markets remain sensitive to geopolitical developments. The unfolding crisis following the US-Israel strikes on Iran in late February and the subsequent constriction of trade through the Strait of Hormuz have increased uncertainty across markets in the Middle East.

But the kingdom’s lengthening record of sustained capital markets activity reflects both the scale of the Gulf’s largest economy, and more than a decade of financial-sector reforms tied to the Saudi government’s Vision 2030 development plan.

As the government pushes to diversify away from hydrocarbons, the equity market has become an important platform for financing growth, widening ownership, and attracting foreign capital.

“Today the Tadawul All Share Index [TASI], which tracks the Main Market, includes more than 265 companies, alongside nearly 130 on the Nomu parallel market,” says Tarek Fadlallah, chief executive of Nomura Asset Management Middle East. “Together, they provide a much more representative picture of the kingdom’s evolving economy.”

While Saudi Aramco remains the index’s anchor, Fadlallah notes that the exchange now embraces industries ranging from technology and healthcare to logistics, retailing, and real estate.

“Many of these companies are privately owned rather than state-controlled entities,” he adds, “reflecting the growing role of the private sector in the Saudi economy. These changes position the TASI as a more credible vehicle for capturing Saudi Arabia’s structural growth story.”

Underpinning the steady flow of listings is a broader transformation of Saudi Arabia’s capital markets infrastructure.

“Three to four years ago, the Saudi IPO market was not as active or as developed as it is today,” says a Riyadh-based equity capital markets banker. “Since then, we’ve seen a broader ecosystem take shape, including more international banks establishing a stronger local presence and greater foreign investor engagement.”

The mechanics of bringing companies to market have also evolved.

“Pre-IPO preparation is deeper, due diligence is more rigorous, and book building has become more sophisticated,” the banker says.

This evolution is closely tied to Vision 2030’s Financial Sector Development Program, which aims to deepen capital markets, expand financing channels, and encourage more private-sector listings. Regulators have also taken steps to gradually open the market to international investors. In February 2026, authorities removed the Qualified Foreign Investor requirement, allowing a wider pool of global investors to access Saudi equities more easily.

Domestic Capital Still Anchors Demand

Despite reforms and growing international investor interest, domestic investors remain the backbone of the Saudi IPO market. Local institutional investors, including asset managers, pension funds, and family offices, anchor demand for new listings while retail investors play a larger role than in many other emerging markets.

“Retail participation has supported liquidity alongside domestic mutual funds and institutional investors,” says the Riyadh-based banker.

Foreign investors are nevertheless becoming more active as Saudi Arabia integrates more closely with global capital markets. A milestone occurred when major benchmarks included Saudi Arabia in 2019, including the MSCI Emerging Markets Index and the FTSE Russell Emerging Markets Index. Saudi equities could then enter global portfolios and generate passive inflows from index-tracking funds.

“Saudi Arabia’s inclusion in global indices has driven additional foreign investment interest,” says Sawsan Abdullatif, research associate at Bahrain-based asset manager SICO.

Even so, domestic capital continues to provide the foundation for most IPO demand.

As the pipeline of listings has expanded, investor behavior has evolved, but the larger supply of deals has also brought greater scrutiny.

Institutional investors are placing greater emphasis on earnings visibility, governance standards, and credible growth strategies.

“Deal flow quality varies from one offering to another and is closely linked to earnings visibility, strength of management guidance, sector positioning, and the clarity of disclosure in the prospectus,” notes Abdullatif.

Valuation dynamics have also begun to shift.

Imad Chukrallah, founding partner and fund manager at Amwal Capital Partners, observes that the market has matured significantly as more companies prepare to list: “The process to IPO is clear and the pace of listings largely depends on investor appetite.”

“As valuations compressed and the premium to emerging markets largely disappeared, new listings have had to price more attractively,” Chukrallah says.

Foreign investors are also contributing to market inflows, he adds: “The largest inflows into the market have been coming from international investors, who remain underweight in Saudi Arabia relative to benchmark indices.”

Regional Leadership

Saudi Arabia remains the deepest equity market regarding market capitalization, tradable stocks, and daily trading volumes, Chukrallah notes, and recent deals suggest the pipeline remains active.

Last year, low-cost Saudi airline Flynas launched a major IPO tied to the kingdom’s expanding tourism sector.

Other Gulf markets, however, remain active. The UAE has hosted multiple high-profile listings in recent years while Oman’s listing of OQ Exploration & Production in 2024 demonstrated that landmark deals can emerge elsewhere in the region. Qatar has also seen some limited listing activity.

But the scale of the Saudi market provides a clear advantage.

“The depth of its domestic institutional base, breadth of sectors and scale of the economy provide structural advantages,” Abdullatif observes.

Alongside the Main Market, Nomu has become an important pipeline for smaller companies seeking access to public capital. The parallel market offers lighter listing requirements than the main exchange, and while liquidity remains comparatively limited, Nomu serves as a steppingstone for companies that may later graduate to the main board.

Navigating Geopolitical Uncertainty

To be sure, the crisis that began with the US-Israeli assault on Iran looms over these more positive changes.

“The geopolitical environment remains uncertain,” the Riyadh-based banker acknowledges. “Any further deterioration would likely affect sentiment, issuance timelines, and potentially, the wider diversification story.”

So far, however, the Saudi market has shown resilience.

“While the recent developments increase uncertainty, the Saudi market was not much impacted,” Chukrallah said last month. “In fact, the market is net up since the start of the war. Appetite for successful companies with a unique value proposition remains strong.”

Saudi Arabia’s IPO market is increasingly defined not just by the pace of listings but by deeper institutional participation, broader sector representation, and a growing pipeline of private-sector issuers.

The combination of regulatory reforms, expanding investor participation, and a stronger listing pipeline suggest it will remain not only the region’s busiest IPO market but also one of the world’s more structurally important financial centers.

The UAE has carefully crafted a position for itself as a hub for digital assets. Can the good times last?

The United Arab Emirates (UAE) positions itself as a center for digital assets, a market that may be worth up to $500 billion over the next few years by some estimates. Dubai and Abu Dhabi are already acknowledged as global hubs, based not only on quality of regulatory oversight but their early strategic bet on tokenization as the basis of a new financial infrastructure.

But the UAE’s pioneering moment may soon end. The US-Israeli war against Iran, launched in February, has sown doubts as to whether the Persian Gulf monarchies are the haven of stability they claim to be. And for all the regional talk of tokenization and fintech, longestablished financial centers elsewhere are taking the lead in drawing up a unified set of rules to govern crypto regulation. If a clear regulatory framework emerges, it could reshape crypto market dynamics at the UAE’s expense.

In January, the New York Stock Exchange (NYSE), the world’s largest financial market, said it was launching a platform for 24×7 trading and on-chain settlement of tokenized securities, a development some analysts predict will spark a revolution in capital markets. The move by NYSE could leave some other financial centers behind as liquidity and institutional investors shift to more efficient, always-on markets.

Financial centers, including London, Singapore, and Hong Kong, are also evaluating tokenization.

And other Gulf Cooperation Council (GCC) member states, notably Saudi Arabia, Qatar, and Bahrain, are increasingly embracing tokenization, backed by financial war chests of various sizes.

Management consultancy Kearney earlier this year estimated that by 2030, close to $500 billion of assets across the GCC could be placed on-chain, the most fertile ground being in private markets, public equities, funds of tokenized sovereign wealth fund (SWF) assets, commodities, real estate, and bank deposits. Tokenizing these assets would unlock some of the GCC’s most prized but difficult-to-access holdings, such as SWF assets and family offices. Tokenizing listed securities, for example, could simplify cross-border transactions and open markets to fractional ownership, a move likely to attract global investors looking to participate at smaller ticket sizes.

UAE real estate is already on the road to wider tokenization. Last year, Dubai launched a real estate tokenization sandbox pilot, the first regulatory body in the region to adopt blockchain-based tokenization for fractional ownership. The initiative coordinates with the emirate’s Virtual Assets Regulatory Authority (VARA), which monitors issuance, trading, and custody, together with the Central Bank of the UAE, which ensures compliance with national financial regulations.

For some analysts, the holy grail would be the tokenization of the GCC’s oil output. In January, Bahrain and UAE-based Gulf Energy Exchange announced plans for the first oil-backed stablecoin, aptly named OIL1, subject to regulatory approval by the Central Bank of Bahrain (CBB). OIL1 is to be collateralized by verified reserves of Persian Gulf crude oil and pegged to the US dollar, creating a link between the energy sector and digital assets.

Regulatory Oases

To stay competitive, however, the UAE will need to continue innovating, given that adoption of tokenization and digital assets is moving at breakneck speeds. Tokenization’s market growth “looks like an express ride to the top of the Burj Khalifa,” Kearney noted, a reference to the world’s tallest building, located in Dubai.

Dubai and Abu Dhabi operate offshore free-zone financial centers—the Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM)—both of which have taken leading roles in ensur ing the UAE remains at the forefront of digital-asset innovation, says Jason Barsema, president and co-founder of Chicago-based Halo Investing. “The UAE’s ascendancy as the destination for digital assets is rooted in a unique policy-to-production approach that separates it from purely speculative markets,” he notes.

The UAE’s Securities and Commodities Authority offers a comprehensive regulatory regime straddling the central bank while Dubai’s onshore VARA, Abu Dhabi’s Financial Services Regulatory Authority (FSRA), and the Dubai Financial Services Authority (DFSA), which are offshore entities, operate at the local emirate level.

This regulatory landscape gives international investors a degree of comfort that governance standards are aligned with global legal standards. Its core advantage is a sophisticated yet “pragmatic regulatory architecture that offers something most emerging markets still lack: clarity,” says Shivkumar Rohira, CEO of EMEA at financial services firm Klay Group.

“Dubai’s VARA, alongside the DFSA in the DIFC, has built a tiered, activity-based framework that sets out clear permissions for exchanges, custodians, and token issuers, while tightening standards around AML, investor protection, and market integrity,” he adds.

Abu Dhabi’s ADGM has gone further in positioning itself as an institutional-grade venue with a regime that accommodates tokenized securities, funds, derivatives, and increasingly, staking, among other yield-generating activities.

“This integration keeps Dubai and Abu Dhabi the default GCC base for global digital-asset players even as regional rivals race to catch up,” says Rohira.

Even within the UAE, however, there are fundamental differences of approach between Dubai and Abu Dhabi, notes Martin Leinweber, director of Digital Asset Research and Strategy at MarketVector. The result is a layered system that gives firms the flexibility to structure licensing around their business model, not the other way around.

“What strikes me most from an institutional perspective,” Leinweber says, “is how deliberately the UAE constructed its regulatory architecture at a time when most major financial centers were still debating whether crypto deserved a framework at all.”

In creating VARA, Dubai established a purpose-built regulator with its own mandate, rulebooks, and enforcement capacity rather than grafting virtual asset oversight onto an existing regulator. In comparison, Abu Dhabi took a complementary path through ADGM’s FSRA, he notes.

Other GCC States Wake Up

While the UAE may be in the lead, other GCC states are finding a place for tokenization in their financial markets as well.

Bahrain’s regulatory framework is closest to the UAE’s, but with the CBB as sole authority for virtual assets. That includes a regulatory sandbox where firms can test and modify digital asset models; Rain was the first crypto-asset firm to be accepted into the program, in 2017.

Bahrain FinTech Bay, the island kingdom’s fintech center, acts as an incubator, bringing together startups, regulators, and financial institutions.

Qatar is taking a more gradual approach; the Qatar Financial Center (QFC) is over seen by the QFC Regulatory Authority, which has recognized tokenized assets, custody, and transfer within a virtual assets framework under the QFC’s jurisdiction.

The GCC’s largest economy, Saudi Arabia, remains underdeveloped when it comes to digital asset readiness, Kearney found, but the authorities have signaled openness to some use cases, including tokenized deposits and stablecoins. Further announcements are expected this year as tokenization becomes embedded in regional capital markets. The Kingdom is home to the buy-now-pay-later juggernaut Tabby, which was valued at $4.5 billion following a recent secondary share sale.

Oman, which recently announced it was establishing a financial center, is moving toward a digital assets framework under the auspices of the Central Bank of Oman, in compliance with existing AML standards. Conversely, Kuwait has adopted the GCC’s most restrictive digital assets policy. Several crypto activities increasingly accepted in other markets, including payments, trading, mining, and tokenization, are banned. The government cites market stability and risk as the primary reasons; the Kuwaiti stock market has a history of instability and volatility.

Although the NYSE threatens to jump ahead of the competition, it has done so against a backdrop of regulatory uncertainty; there is yet to be a definitive set of laws as to how tokenized assets are classified, issued, held, and traded in the US. Dubai and Abu Dhabi may be ahead of that curve, but even they have work to do to allay wider concerns, as does the rest of the GCC.

Those concerns, underscored by the conflict with Iran, center around the question of whether the GCC is a long-term stable environment for global investors. And with the US on the cusp of approving the CLARITY Act, creating a comprehensive regulatory framework for digital assets, and Europe moving toward unified regulation, investors may prove more inclined to opt for the safety of more established financial markets. If so, the UAE’s outsized position in the digital assets market may not be as secure as it would like.

War in Iran and US tariffs are destabilizing global trade. But commerce hasn’t slowed; it’s simply rerouting.

As last fall’s G20 summit closed in Johannesburg, the United Arab Emirates announced plans to inject up to $1 billion in AI infrastructure funding across Africa. The pledge is the latest in a growing wave of investment from the Gulf Cooperation Council states that signals a broader shift.

Together, the Middle East and Africa represent roughly 2 billion consumers and a combined GDP of more than $5 trillion. Investment and trade spanning the regions are already accelerating. GCC countries have deployed over $100 billion in Africa and bilateral trade grew at an annual rate of about 8% between 2021 and 2022, reaching $154 billion.

Europe and China remain the continent’s largest capital providers, but the Gulf states are closing the gap. As war, supply-chain disruptions, and new US tariffs reshape global trade, countries across the MENA region see an opportunity to position themselves as the logistical and financial bridge linking Asia, Europe, and Africa.

Gateways And Corridors

The two natural points of entry are Egypt and Morocco. They have a foot in both regions and long experience navigating between the Arab world and the African continent.

Egypt acts as a gateway to East Africa, with commercial routes extending toward Sudan, Kenya, and Uganda. Morocco has established itself as a hub for west Africa, leveraging decades of political and economic ties with francophone markets. Businesses from both countries are expanding across the continent in sectors including food processing, manufacturing, pharmaceuticals, chemicals, telecoms, and technology.

Over the past decade, the Gulf states have also steadily expanded their presence, deploying capital through longterm strategic investments to reshape Africa’s trade routes while securing access to land, natural resources, and fast-growing markets.

Gulf investors are targeting corridors along the Red Sea and the Horn of Africa, including the Berbera–Ethiopia trade route and points of access to the Indian Ocean, the Atlantic, and the Mediterranean. Their aim is to anchor supply chains that direct African trade through Gulf logistics hubs before it reaches global markets.

“The GCC is becoming more and more of a trade hub for Africa,” says Tarek El Nahas, group head of International Banking at Dubai-headquartered Mashreq Bank. “We’ve got a lot of clients that have their regional operations here for both Middle East and Africa.”

Infrastructure is central to these developments. The UAE and Saudi Arabia are investing heavily in ports, logistics hubs, and industrial zones, laying the foundations for new Global South supply chains.

The UAE is by far Africa’s largest Gulf stakeholder. Dubai’s DP World and Abu Dhabi Ports have secured concessions to operate and develop ports in Algeria, Egypt, Somalia, Somaliland, Tanzania, South Africa, Guinea, Senegal, Sudan, the Democratic Republic of Congo, Mozambique, Congo-Brazzaville, Eritrea, Rwanda, and Niger.

Air connections are also an investment target, with Qatar Airways supporting several African airlines including South Africa’s Airlink while Doha in 2019 acquired 60% of Rwanda’s new international airport.

Telecom operators such as Qatar’s Ooredoo and the UAE’s e& (formerly Etisalat) support cable infrastructure and data centers and have signed partnerships with local providers like Maroc Telecom as part of a plan to reach several dozen countries across the continent by 2030.

In light of the recent Iranian attacks on GCC infrastructure, UAE and Saudi Arabia are also considering shifting some AI assets to secure locations in Africa. Abu Dhabi’s G42 is already building a $1 billion data center in Kenya.

Commodities, Food, And Energy

What, then, are these closely connected regions trading? Exchange often begins with natural resources.

Oil and gas dominate Gulf exports to Africa, while the continent supplies metals. Gold is a major African export to the UAE, already a hub for precious metals and stones; Gulf investors are also targeting rare metals and minerals critical to energy transition and AI supply chains.

Deal activity reflects this shift. Last year, Abu Dhabi-based International Resources Holding acquired 51% of Zambia’s Mopani Copper Mines for $1.1 billion. Saudi Arabia’s Maaden Holding, through Manara Minerals, is pursuing similar deals in Zambia and elsewhere.

These ventures sometimes feed Western markets. In November, the US and Saudi Arabia agreed to cooperate on mineral supplies to reduce reliance on China, and in March, US-based Cove Capital and Saudi Arabia’s AHQ announced a “multibillion dollar” fund to invest in African minerals including cobalt, copper, lithium, and rare earths.

Renewable energy is another focus. The UAE’s Masdar has committed $10 billion to African clean energy projects by 2030, backing solar projects in Angola, Uganda, Zambia, and Mozambique. Late last year, Saudi Arabia’s Acwa Power signed a deal with the African Development Bank to invest up to $5 billion in renewable energy and water systems in countries including South Africa, Egypt, and Morocco.

Food security is also a major driver for GCC countries, which buy over 80% of their comestibles from abroad. The UAE and Saudi Arabia import agricultural products and livestock from across Africa while investing in farmland and production projects to secure long-term supply. Qatar has made important commitments in North African countries, including a $3.5 billion dairy farm in Algeria.

North African manufacturers, meanwhile, are increasingly targeting African markets. Egyptian pharmaceutical companies, for example, have become major exporters across the continent.

Regulatory challenges and logistical bottlenecks persist, but African trade integration is supported by a growing web of multilateral agreements. Regional frameworks including the Common Market for Eastern and Southern Africa (COMESA), the Agadir Agreements, and the African Continental Free Trade Area (AfCFTA)— launched in 2021 and designed to unify a market of 1.5 billion people—facilitate investment and commercial exchange.

Several countries also benefit from US and European trade preference programs such as the African Growth and Opportunity Act (AGOA), which allows some 30 African economies to export certain goods to the US duty-free. These arrangements make parts of Africa and MENA increasingly attractive as manufacturing and re-export bases for companies seeking to access Western markets.

“We’re starting to see more companies from Asia, for example, setting up a presence in the MENA region to benefit from a lower tariff environment, and I think Egypt will become a big beneficiary in terms of manufacturing,” El Nahas says.

Financing The Corridors

Moroccan and Egyptian banks have taken the lead in cross-border expansion, financing trade and infrastructure projects across the continent. Most international lenders, by contrast, maintain a limited on-the-ground presence in Africa but operate through regional hubs that circle the continent, notably in Morocco, Egypt, Nigeria, Kenya, and South Africa.

War, tariff volatility, and shifting capital flows challenge the global currency order—even as markets prove resilient.

When Japan’s largest automaker reported 2025 results last May, it said its earnings were hit by $4.6 billion in foreign-exchange losses due to the US dollar’s decline. This month, Toyota has a new concern: the war in Iran that has spread throughout the Persian Gulf. The company sold 325,000 cars to the region in 2025, but the fighting and the closure of shipping lanes through the Strait of Hormuz could further decrease earnings.

Even more damaging, the company is forecasting a roughly $9.6 billion drag on earnings in 2026 due to President Trump’s on-again, off-again tariffs. “The impact of US tariffs,” Toyota CFO Kenta Kon said, “is a significant rise from our initial forecasts.”

 The global economy entered 2026 already on shaky ground. The Trump administration’s sweeping tariff policies weakened the dollar and heightened trade fears, while a Supreme Court decision on those tariffs added fresh uncertainty, even as inflation was slowly easing. Then, on February 28, US and Israeli forces launched strikes on Iran, oil prices surged, and the dollar bounced higher in a flight to safety.

The Strait of Hormuz, which carries about 20% of global oil and LNG exports, effectively closed after Iranian threats and tanker attacks, sending oil prices from about $70 to more than $110 a barrel within days. Oil-import-dependent economies such as Japan, South Korea and China were especially vulnerable to the war’s aftershocks.

Higher oil prices. Uncertainty about tariffs. The dollar boomerang. Corporate finance executives face a new series of challenges: Higher oil prices, etc. However, despite short-term headwinds for business, global analysts remain relatively optimistic about the long-term economic outlook, even with the war’s sudden shadow over markets.

While energy concerns increased as war clouds gathered over the Persian Gulf, analysts largely believed that the global economy would revert to a pattern similar to the pre-war period: a gradually declining dollar, reduced foreign investment in US assets, and inflation that persistently prevents central banks from lowering interest rates. A key sign of market consensus was that, by mid-March, the forward price of oil for October delivery was $79 per barrel, compared to its temporary $110 spike after the war began. But the uncertainty surrounding the objectives and duration of the attacks on Iran by the US and Israel has kept oil prices bouncing around $100 per barrel.

Aside from the currency issue, several factors have contributed to relatively positive economic forecasts despite the fighting in the Gulf. The Trump administration maintains, despite its forecast having been extended, that the disruption to energy supplies will be relatively short-lived. “You’re seeing a little bit of a fear premium in the marketplace, but the world is not short of oil or natural gas,” said Energy Secretary Chris Wright on CNBC in early March. “Worst case is a few weeks, not months.”

As Dollar Falters, China Moves In

The dollar had a tough year in 2025, dropping about 12% against a basket of other major currencies. Although US administrations usually support a strong dollar, President Donald Trump broke that tradition and said it was “great” that the dollar was falling on global markets, which caused it to tumble even more.

The dollar’s decline triggered a significant shift into gold, which increased in value by 60% in 2025, reaching a record price of $5,110 per ounce. European stocks saw their largest inflows ever in February as investors moved away from the United States.

Marc Chandler, chief market strategist at Bannockburn Global Forex, said that for much of 2025, foreign investors had been buying US equities while shorting the dollar as a hedge. “Now that US equities are declining, they have to buy back their short-dollar hedge,” Chandler said. “I’m not convinced that what we’re seeing in the dollar is much more than unwinding positions, rather than people flocking to the US as a safe haven.”

Mark Sobel, former head of international finance at the US Treasury, wrote in a March 2025 op-ed for the Financial Times that the dollar’s dominance was slowly eroding. “Like termites eating away at a house’s woodwork, Trump’s dysfunctional policies are eating away at its support and rendering the US currency acutely vulnerable to future shocks,” Sobel said.

A weaker dollar is not just a market story—it is reshaping currency dynamics globally, with China at the center. The Chinese government intervened on February 27 to stop the renminbi’s appreciation against the dollar, which had increased by 7% since last April. The People’s Bank of China (PBOC) announced it would eliminate the 20% reserve requirement on foreign exchange forward contracts and stated it would keep the renminbi’s exchange rate at a “reasonable and balanced level.” The higher value of the renminbi did not hurt Chinese exports—the country recorded a $1.2 trillion trade surplus in 2025.

China’s government has used the weaker dollar to strengthen the renminbi’s role in trade finance and payments, with officials claiming the currency is now the world’s largest trade-finance currency. Chinese companies have been gradually decreasing dollar transactions. The dollar’s share of cross-border transfers has dropped from 80% in 2010 to about 40% in 2025, mainly due to increased renminbi flows. The renminbi’s share of global trade has grown from 2% in 2021 to over 7%, a notable rise but still not enough to threaten the dollar’s dominant position in world trade.

In Japan, as inflation rises, the Bank of Japan is expected to increase interest rates, according to Mitsubishi UFJ Financial Group. While the Federal Reserve in the US has kept rates steady through its mid-March meeting. The BOJ’s move to tighten policy after ending its negative interest rate policy is seen as a factor aiding yen appreciation.

Europe has been significantly affected by the rise of the euro, which appreciated nearly 12% against the dollar in 2025. “I have watched the dollar rate with concern for some time,” German Chancellor Friedrich Merz said. “The dollar course is a considerable extra burden for the German export economy.” Dirk Jandura, head of the BGA, Germany’s wholesale and foreign trade association, said the strength of the euro was causing exporters “great concern.” The dollar’s easing, though, has softened some of that impact.

Economy Shows Resilience

Supporting the Trump administration’s more optimistic oil outlook, the International Energy Agency agreed in early March to release 400 million barrels of oil to address the supply disruption—the largest such action in the organization’s history. The move reinforced officials’ view that any price spike would likely be short-lived, lasting weeks rather than months. The 32 member countries still have about 1.4 billion barrels of emergency reserves that can be tapped if the shortage worsens.

“The rise in crude oil prices to date does not represent a shock of the magnitude seen in earlier episodes,” said J.P. Morgan analysts Bruce Kasman and Nora Szentivanyi. “At [about] $100 a barrel, Brent crude is less than 35% above its two-year trailing average. To deliver a shock similar in size to the Russian invasion, crude oil prices would need to move close to $150 and remain at this elevated level for several months.”

Joe DeLaura, an energy analyst at Rabobank in the Netherlands, urged companies to have a plan in place to make quick decisions involving their energy supplies. “Start assessing your supply chains and your access to capital markets,” DeLuca told a webinar in March. “Are you shoring up relationships? Are you able to have critical redundancy in your supply chains, especially for key inputs like energy? One of the ways to take advantage of this is by looking further out on the curve and take advantage of volatility when it swings in your favor.”

Unlike in 1973, when a Middle East oil embargo caused inflation to soar, the United States now exports both petroleum and liquefied natural gas. Therefore, the war is unlikely to significantly impact the US economy in 2026, as it would require a “very severe scenario” for US economic growth to contract, according to Oxford Economics. “We have a view that the US dollar is going to broadly continue to somewhat weaken,” said Daniel Moseley, associate director for scenarios and macro modeling, at Oxford Economics.

Asia Hit Hard

The Iran War most heavily affects Asia. According to the US Energy Information Administration, 84% of crude oil and 83% of LNG travels to the region. I would also say war in Iran. China, India, Japan, and South Korea are the leading destinations for Persian Gulf crude oil, but Thailand and Vietnam also rely heavily on imported energy.

Companies like Toyota have limited options but to cut costs. One strategy is localizing their supply chains. The company announced in February that it plans to invest $10 billion in the US over the next five years to increase production of its most valuable hybrids. It is also reducing production of lower-value models and stated it will implement three price hikes in 2026 to compensate for the “double whammy” of a weaker dollar and US tariffs.

Rajiv Biswas, CEO of Asia-Pacific Economics in Singapore, states that a major concern in Asia is that a prolonged energy shortage could lead to a surge in inflation, prompting central banks to increase interest rates. China’s government, for instance, ordered refiners to halt diesel exports, seemingly worried that supplies could run low during a lengthy conflict.

Biswas stated that the Persian Gulf is also a major shipping route for urea and sulfur used in fertilizer production. This means “the agricultural sectors of many Asian developing countries could also be hit by lack of essential inputs,” as well as the US, right as the Spring planting season begins. Additionally, Brazil, the world’s leading soybean producer, imports most of its urea from Qatar and Iran. India depends on Saudi phosphate exports.

Europe Needs To Urgently Use AI

No European industry was more affected by the dollar’s rise than automobile manufacturing. At luxury carmaker BMW, for instance, revenues fell 5.9%, with half of the decline attributable to the strength of the euro, which created a $670 million headwind. Additionally, US tariffs reduced earnings and imports from China and limited sales to Europe.

“If you take all these elements together, the headwind is bigger than the tailwind, which we’re working on,” BMW CFO Walter Mertl said. He added that the company had cut costs by $2.6 billion to boost profitability. “We are working on all cost elements,” Mertl said, including capital expenditures, research and development spending, and sales and general expenses.

To hedge against a weakened dollar that makes their exports more expensive, European companies need to do more than cut costs. These companies need to invest urgently in cutting-edge technologies, such as artificial intelligence, to make them more competitive in the global marketplace, says Marcello Messori, a professor at the Schuman Centre of the European University Institute in Milan.

“Europe needs to look at artificial intelligence and how it is compatible with the green transition and try to exploit these specific sectors,” Messori says. “Between the current European specialization in mature technologies and the technological frontier, there are a lot of opportunities that you can exploit between those extremes.”

One company leading this approach is Siemens, once known for low-profit industrial machinery. CEO Roland Busch stated that the company has strong growth prospects because it has focused on adopting new technology. “We are in a good place because we are offering what the world needs,” Busch said. “We are positioned along secular growth drivers: automation, digitalization, electrification, sustainability, and artificial intelligence.”

Messori emphasizes that the European Union must speed up efforts to unify financial markets to create a larger pool of venture capital. He notes that Sweden boasts a thriving startup economy. However, established companies often relocate quickly to the US, where capital markets are more accessible.

While the results of wars rarely match initial predictions, the consensus among analysts is that by year’s end, the Iran war may be seen as an economic distraction rather than a strategic turning point. The forces that defined markets before the conflict—moderating inflation, steady demand, and resilient consumer spending—are expected to keep the global economy on track. The dollar, meanwhile, is likely to remain volatile but broadly weaker over time, as structural pressures and shifting capital flows continue to test its dominance.