The Iran war has broken that assumption, and the region is now spending its way out of the consequences.

The Strait of Hormuz was previously a chokepoint for around 20% of global oil flows, and it has been virtually blocked for much of the past six months, prompting a burst of billions of dollars in investment commitments as Gulf energy exporters try to future-proof economies now facing a severe slowdown.

Trade has been redirected to Saudi ports on the Red Sea and to the United Arab Emirates’ eastern ports, but capacity there is smaller.

The scramble is no longer about finding a workaround for one bad quarter. Gulf governments are now looking at ways to build permanent, integrated solutions that get around the strait entirely, according to an industry source who declined to be named because of the sensitivity of the matter.

Ports, ports, ports
The most striking shift is in how Gulf capital is being allocated. For a decade the headline spending went into tourism, sport, giga-projects and artificial intelligence (AI). That order has been rearranged almost overnight.

Ports have become a mission-critical priority for Gulf governments including Saudi Arabia, a second industry source told Reuters, adding that where two years ago sport was the buzz, for the next year or two it will be “ports, ports, ports”.

The numbers behind that shift are grim. AD Ports, which runs terminals in the UAE and internationally, saw UAE container throughput as well as bulk and general cargo volumes fall by around two thirds in the second quarter from a year earlier, describing the period as the most significant challenge in its 20-year history.

Abu Dhabi sovereign wealth fund L’IMAD has said it plans to buy out the rest of AD Ports as it revamps the company’s strategy.

Dubai’s DP World, one of the world’s largest port operators, also reported a first-half decline, and is developing two container terminals in Fujairah as well as inland container depots in the UAE.

Fujairah is the tell. Sitting on the Gulf of Oman, outside the strait, it is the one Emirati port that tankers can reach without entering the Persian Gulf at all.

The UAE is building a new oil pipeline there that will double crude capacity to Fujairah when it becomes operational next year.

Analysts at Kpler estimate the country is targeting 3.6 million barrels per day of bypass capacity by mid-2027, roughly double the current level, through a parallel line alongside the existing Abu Dhabi Crude Oil Pipeline.

Saudi Arabia is running the same play at greater scale. The Kingdom has fast-tracked billion-dollar plans to steer oil away from Hormuz, including a capacity expansion of its crude pipeline to the western Red Sea coast, which could also help neighbours move oil without crossing the strait.

The Abqaiq to Yanbu system, known as Petroline, was designed for five million barrels per day, with Aramco reporting in March 2025 that capacity had been raised to seven million, and as of early 2026 only around two million barrels per day was being used, leaving substantial headroom.

Funding, for now, is not the binding constraint. Costs could run into hundreds of billions of dollars over coming years, and Gulf sovereign wealth funds, among the biggest in the world, are already stepping in to accelerate the push, while some governments may also court external capital as international infrastructure funds circle the region’s assets.

Zin Bekkali, chief executive of UK-based Silk Invest, argues Gulf governments have the capital to fund most of this internally, and that infrastructure is clearly set to benefit.

The bill for six months of war
The spending is happening against a badly deteriorating macro backdrop, which is precisely why it counts as strategy rather than stimulus.

Qatar and Kuwait’s economies are expected to contract by just over 8% this year, according to a Reuters poll, while Saudi Arabia is forecast to grow only 1.4% after 4.5% in 2025. Qatar, among the world’s top LNG exporters before the war, depends entirely on the strait to ship gas and is also dealing with severe production shortfalls after damage to its energy facilities.

Beyond shipping, strikes on production facilities have hit refineries, aluminium plants and data centres, while air traffic remains below pre-war levels, dragging on tourism and business travel.

Landlocked in effect, if not in law, the smaller producers have the worst hand. Kuwait Petroleum Corp is in talks with Saudi Arabia and the UAE about expanding their pipeline systems to carry Kuwaiti oil.

Kuwait was forced to declare force majeure in March, and Bahrain’s Sitra refinery was struck repeatedly. The reputational damage may outlast the physical damage. The war has shaken the standing of Gulf hubs as safe havens, and that is a harder thing to rebuild than a jetty.

Iraq, the dark horse
If there is a winner-in-waiting, it is the country least equipped to look like one. Iraq entered the war with a single functioning export outlet, the southern terminals at Basra, and paid for that concentration immediately.

Output fell from 4.3 million barrels per day to under 1.5 million in May. By July, southern exports were running at about 35.5 million barrels a month, against roughly 105 million before the shipping crisis.

That collapse has done what two decades of feasibility studies could not, which is force Baghdad to build overland. Iraq is working to expand exports through Turkey’s Ceyhan port and aims to begin shipping through Syria’s Baniyas and Jordan’s Aqaba, involving new pipelines.

In August, Iraq and Turkey signed a one-year agreement providing for a minimum of 750,000 barrels per day through the Kirkuk to Ceyhan line while a broader framework covering oil, electricity and water is finalised.

The bigger prize is the Basra to Haditha trunk line. Designed for around 2.5 million barrels per day, it would move southern crude westwards and fan out in three directions, towards Baniyas, Ceyhan and Aqaba, while feeding refineries along its route.

Prime Minister Mohammed Shia al-Sudani approved USD 1.5 billion for the work in 2026, to be carried out with Chinese partners.

Execution risk is real. The old Kirkuk to Baniyas line has been out of service since it was damaged during the 2003 invasion, and Iraq has announced the Aqaba route before without building it.

But the strategic logic has changed. A Basra to Mediterranean corridor would make Iraq the only large producer able to reach European and Asian buyers from both ends of West Asia, and it would give Kuwait and, in time, Gulf gas a second landbridge that does not depend on Saudi goodwill alone.

West Asia becomes the workaround
What began as a Gulf problem is being solved on a West Asian map. Syria’s Mediterranean coast, Jordan’s Red Sea outlet and Turkey’s Ceyhan terminal have all been pulled into the energy security calculations of countries that previously treated them as peripheral. Damascus, in particular, acquires leverage it has not held in a generation.

Rail is following the same logic. Turkey and Saudi Arabia intend to build a line connecting the two countries through Jordan and Syria within three or four years, Turkey’s transport minister said in June, with other Gulf states expected to join.

The honest caveat is that none of this arrives soon. There has been some reopening of the strait, though trade remains limited and there is no clear end in sight to the conflict between Iran and the United States despite a cooling of hostilities.

Pipelines take years, ports take longer, and every alternative route carries its own exposure, whether that is Red Sea shipping risk or Iraqi and Syrian security.

Afaq Hussain, formerly of the Atlantic Council’s Middle East Initiative, put the lesson plainly, saying the crisis showed these vulnerabilities are real and can strike any chokepoint at any time, and that backup routes are worth building even when they look uneconomical at first.

For a region that has spent fifty years optimising for cost, learning to pay for redundancy may be the most expensive lesson of all.

ALSO READ | Iran war: Chinese airlines sink deeper into losses as jet fuel prices bite

The airline is looking to shed the tag of being a low-cost one, apart from boosting ancillary revenue through assigned seating, extra-legroom seats and other product enhancements.

JPMorgan Chase will partner with Southwest to open the airline’s airport lounges.

Globally, while flyers prefer airport lounges as quieter places to work or relax, apart from enjoying complimentary food and ⁠drinks and a more seamless airport experience, airlines are equally seeing the arrangement as a winning formula to lock in customers, support premium fares and drive spending on lucrative co-branded credit cards.

Talking about co-branded credit cards, Southwest will roll out a similar product in 2027 that will be issued by Chase to provide customers access to its airport lounge network.

Initially, Southwest will open four lounges in Austin, Baltimore, Honolulu, and Nashville, with more to follow.

American aviation’s premium push comes amid the airlines globally feeling the pinch of a sharp rise in fuel prices ‌stemming ⁠from the Iran war, squeezing their already thin margins.

Carriers with a stronger suite of premium offerings, as per the analysts, are better positioned to weather the pressure, as they can lure travellers willing to pay more for higher-margin services such as premium seating, lounge access and other ⁠upgrades.

ALSO READ | Iran war: Higher fuel costs weigh on UK carriers’ earnings outlook

Southwest, under the pressure of activist investor Elliott Investment Management, has been overhauling its business to better compete with the network carriers, following post-COVID weaker profit margins.

CEO Bob Jordan, three months ago, signalled that the carrier could add more cabin options, including “true first class,” apart from venturing into long-haul international flying.

Among other budget carriers, Frontier is adding first-class-style seats, while JetBlue is expanding its premium offering with airport lounges.

President Trump’s family’s crypto business, World Liberty Financial, has also issued its own stablecoin.

Both the new entities formed by the global financial giants will be taking on El Salvador-based Tether, the stablecoin market giant.

Talking about Tether, the venture has already issued more than USD 180 billion worth of its dollar-pegged token and made billions in profits by investing the reserves in assets including US Treasuries.

France’s Societe ⁠Generale, which is not in either consortium, in 2025, became the first major bank to issue a dollar-backed stablecoin through its digital asset subsidiary.

ALSO READ | Swiss banks team up to explore a Swiss franc stablecoin

The token, however, has not been ⁠widely adopted, with just USD 12.5 million currently in circulation.

Talking about the stablecoin industry gaining some momentum, global card spending on this front is expected to quadruple to USD 50 billion a year by 2028, said stablecoin payments company RedotPay.

The Hong Kong-based firm’s projection, made in August, came as stablecoin card spend, as per the data from crypto payment card analytics company Paymentscan, crossed USD 1 billion in July, marking a record month.

“Latin ‌America ⁠has the highest adoption and greatest potential for growth at the moment, followed by Africa,” said Jonathan Chan, co-founder and head of partnerships at RedotPay.

“The fastest markets aren’t ⁠necessarily those with the highest crypto penetration. The growth is driven by the confluence of several factors: real payment ⁠pain, easy stablecoin access, strong fiat off-ramps, and regulatory clarity,” the senior official added further.

It has removed any confidence that the shock is temporary. Every attempted de-escalation, including the June memorandum of understanding on reopening Hormuz, collapsed within weeks. Traders now treat energy inflation as structural rather than a passing spike.

Markets had read new Federal Reserve chair Kevin Warsh’s hawkish Jackson Hole remarks as the moment long-end yields would settle. Renewed fighting and dearer crude killed that idea within days.

Governments that cannot stop borrowing
The second force is fiscal, and Japan is the clearest case. Tokyo expects debt servicing costs to rise 17% to a record 36.64 trillion yen, about USD 230 billion, next fiscal year, on an assumed interest rate of 3.8%, the highest in 29 years.

Prime Minister Sanae Takaichi wants to cap new issuance at around 40 trillion yen for the fiscal 2027 budget, a promise aimed at reassuring investors ahead of a fourth straight year of record spending and a planned tax cut on food.

Britain has its own version. Andy Burnham became Prime Minister in July and installed John Healey at the Treasury, and gilt yields moved almost at once on his suggestion that he would seek flexibility within the fiscal rules. The autumn budget is now the event gilt investors are watching.

In the United States, federal interest payments now exceed combined spending on Medicaid, national defence and all non-defence discretionary programmes.

France carries a persistent risk premium over Germany tied to its budget process and the 2027 elections. Investors are asking a question they had not bothered with for fifteen years, which is who buys all this paper, and at what price.

The AI borrowing wave
The third force is new, and most investors underestimated it. The AI buildout has moved from an equity story to a fixed income story.

Alphabet, Amazon, Meta, Microsoft and Oracle issued roughly USD 121 billion of bonds in all of 2025, more than four times their 2020 to 2024 annual average. By early June 2026 the same five had raised about USD 159 billion.

Broader AI-related issuance, taking in data centres, chip financing and project vehicles, has reached roughly USD 500 billion this year, around 18% of total US investment grade supply, up from about 7% in 2025 and roughly 1% in 2024.

The paper is unusually long dated, because data centres are long-lived assets.

Alphabet has issued a century bond maturing in 2126, the first from a technology company since 1997, and technology firms account for around 60% of all deals above USD 10 billion this year.

S&P estimates the five will spend about USD 750 billion on capital expenditure in 2026, equal to 38% of their combined revenue.

The effect is mechanical. A huge quantity of high-grade duration is being pushed into the same part of the curve where governments must fund themselves, just as central banks shrink their own holdings.

Sovereign issuers are now competing directly with Big Tech for the same buyers, and they are not obviously winning. Of 91 hyperscaler bonds issued in 2026 with comparable pricing data, 78 were trading at higher yields in late July than when they were sold.

Tariffs, and the hole they left behind
Tariff warfare has fed the rout from both directions. Through 2025 and early 2026 the American effective tariff rate climbed to nearly 17%, the highest since the early 1930s, and New York Fed research found that close to 90% of the cost fell on American firms and consumers.

That was imported inflation, and it hardened the price expectations now embedded in long yields.

Then, on February 20 2026, the Supreme Court ruled that the International Emergency Economic Powers Act does not authorise the president to impose tariffs, striking down the reciprocal duties.

The administration pivoted to Section 122 of the Trade Act of 1974 and to existing Section 232 and 301 powers, and the average effective rate fell to about 7.1% by June. But the ruling erased a large expected revenue stream and opened the door to refunds estimated at up to USD 175 billion.

A government that loses tariff income without cutting spending borrows the difference, and the bond market has priced exactly that.

Where equities feel it
Global equity indices have absorbed the move so far, but cracks are visible underneath.

The MSCI All Country World Index remains near a record, while the technology-heavy Nasdaq Composite is down almost 4% from its June high. The damage is showing up sector by sector rather than in the headline number.

Long-duration growth stocks are the most exposed, because a higher discount rate compresses the value of profits expected years out. That hits the same technology names now issuing the debt, creating a loop in which the AI trade raises the cost of the capital it depends on.

Utilities and real estate, the classic bond proxies, suffer directly. Investors who held them for income can now get a comparable return from government paper without taking equity risk.

Banks and insurers are the relative winners, because lenders earn a wider spread as the curve steepens and insurers earn more on the fixed income portfolios they must hold. Energy has been among the strongest performing sectors of 2026, for the obvious reason that the thing driving inflation is also driving its revenue.

Housing and consumer discretionary sit at the sharp end. Mortgage rates track the 10-year Treasury plus a risk premium and are at their highest since the summer of 2025, in economies where affordability is already the dominant political complaint. Traders widely regard 5% on the US 10-year as the point at which equity markets stop shrugging.

How governments are responding
On Augusts 19, the United States Treasury said it would at least double its long-dated buybacks, from USD 2 billion to at least USD 4 billion per operation, running from Seotember 9 to November 4, apart from targeting the 10 to 30-year sector, where a buyers’ strike had set in since late June. Yields fell, then erased the move within a day.

Secretary Scott Bessent has since called the figure a floor rather than a limit, and officials have signalled that the roughly USD 1 trillion Treasury General Account could fund larger operations.

The bank has joined the Digital Cooperation Organization (DCO) as an observer, giving it access to specialised policy labs and working groups involving digital-economy experts.

Warba stated that the move would support financial innovation and contribute to the objectives of Kuwait Vision 2035.

Islamic banking in digital mode
Founded in 2010, Warba Bank is headquartered in Kuwait City. The bank operates through a nationwide network of 20 branches, including at The Avenues and Kuwait International Airport. It is one of Kuwait’s newer Islamic banks, and has sought to differentiate itself through digital financial services and innovative Sharia-compliant products.

It has one of the country’s largest shareholder bases.

Warba’s digital transformation predates the current surge in generative and agentic AI. The bank established its Digital Group in 2020, bringing together digital transformation, a digital factory, and business-excellence functions. Since then, it has increasingly integrated technology into both customer services and internal operations.

Building an AI-enabled bank

Over the past three years, Warba has expanded its mobile banking capabilities while increasing the use of automation, data analytics, and AI.

In 2023, the bank enhanced its mobile application with features including personalised dashboards, digital wallets, Google Pay, mobile payments, and a marketplace for gift cards and promotional codes.

Its SiDi digital wallet, designed particularly with migrant workers in mind, was enhanced with digital onboarding and account-management capabilities.

AI was simultaneously being deployed behind the scenes. Warba used AI for data mining and statistical analysis to generate insights and improve forecasting. It developed THEKEY, an AI assistant on Microsoft Teams designed to support employees.

Automation was introduced into a range of operational processes, including card delivery, legal workflows, and financial operations. The bank expanded digital services for corporate customers, including payment links, online letters of credit and guarantees, and digital document submission.

The next stage was to bring AI directly to customers. In 2024, Warba launched Warba Advisor, an AI-powered personal financial adviser. The service uses customer information and data analysis to offer personalised recommendations on products such as accounts, cards, savings, and investments.

Bdr AI represents another step in that progression. While Warba Advisor focuses on recommendations and financial guidance, Bdr AI is designed to interpret a customer’s instruction and initiate supported banking operations.

Learning about Sharia principles
Warba’s technology strategy is not limited to making conventional banking services available through smartphones. The bank has sought to use digital technology to address distinctive requirements of Islamic finance.

One example is its interactive digital Fatwa system, launched in 2023. The system converted the bank’s collection of Sharia rulings into a searchable digital resource. Customers can search for rulings using questions, answers, titles or keywords, making Islamic guidance more readily accessible.

This type of service is significant for digital Islamic banking because the customer experience involves more than executing a transaction. Customers may also want to understand the Sharia principles governing financial products and activities.

Warba has similarly developed digital savings and payment products. Al Sunbula, its Sharia-compliant savings product, allows customers to open accounts digitally while offering returns and prize draws.

Its SiDi wallet is another example of technology being used to broaden access to financial services. The mobile-based proposition provides migrant workers with services, including digital account opening, transfers, payments and debit-card facilities, reducing reliance on physical branches.

Extending innovation to businesses and younger customers
Warba has targeted businesses and emerging consumer communities with technology-led products.

Its iPos wireless smart point-of-sale device, introduced in 2024, enables merchants to accept QR, mobile and digital-wallet payments. The Android-based device also supports foreign-currency transactions and loyalty features, giving merchants a broader digital payments and customer-engagement platform.

For younger consumers, Warba introduced a Game Edition prepaid card in collaboration with Visa, targeting the gaming and e-sports community. The card can be topped up through the Warba mobile application, and supports online and international transactions.

These products reflect an attempt to connect banking services with changing patterns of consumption rather than limiting digitalisation to traditional accounts, cards and transfers.

Focus on community
Warba’s digital transformation has been accompanied by community initiatives covering financial education, social welfare and environmental sustainability.

The bank has supported financial education and professional development through initiatives with organisations such as the CFA Society Kuwait. It has also backed programmes providing school supplies and other assistance to children from disadvantaged families.

In 2025, Warba launched its ‘Plant It for Free’ campaign, involving employees and community volunteers in tree planting and linking social engagement with environmental sustainability.

Its Basmah Ramadan campaign similarly connected banking activity with social support. The initiative directed part of qualifying card transactions at grocery stores and cooperative societies towards providing Eid gifts to orphans and families in need.

From mobile menus to conversations
Bdr AI is the latest stage in a multi-year transformation rather than an isolated technology experiment. Warba has moved from strengthening mobile banking and digital onboarding to automating internal processes, applying AI to data analysis, introducing personalised financial advice and now allowing customers to communicate banking instructions in natural language.

The support for Kuwaiti Arabic voice interactions could prove particularly important as the bank seeks to make digital banking more intuitive and accessible. Instead of learning how a banking application is structured, customers can increasingly tell the bank what they want.

For an Islamic bank, the larger opportunity is to combine that convenience with Sharia-compliant products and digital access to Islamic guidance.

If Warba can maintain security, reliability and customer trust as its AI capabilities expand, Bdr AI could mark a significant shift in how customers interact with Islamic banking — from navigating digital services to simply conversing with them.

Washington’s North American neighbour staged a walkout from negotiations a couple of weeks back on an agreement to avoid additional US tariffs, accusing the Trump administration of making “unacceptable” last-minute demands.Since then, the Republican has not only imposed 50% tariffs on USD 20-28 billion worth of Canadian goods and threatened to take similar action against the neighbouring nation’s auto sector, but he has also declared that Lake Ontario will be renamed Lake America.

Trump, ranting further, ended up ⁠describing Canada’s political leadership as “the worst” he has to deal with, apart from making repeated assertions that Ottawa is ripping off the US.

He also posted an AI-generated meme showing Canadian geese with Trump’s distinctive hairstyle marching under an American flag.

Carney, a central banker-turned-politician, on the other hand, has maintained a calm-yet-determined composure, stating that there was still a chance to strike a mutually beneficial trade deal that respected Canadian sovereignty.

“And when the Americans stop doing memes, stop throwing shade, stop trying to be tough and start being serious about ‌having ⁠those discussions, we can have those discussions,” Carney said, adding that recent US actions were “not constructive.”

The Trump administration, however, has disputed part of the Canadian narrative regarding the reasons for the talks’ collapse, asserting that a favourable deal was available.

However, Carney stated that Ottawa never considered the proposed terms adequate, particularly regarding the highly integrated auto sector.

“The attitude of the United ⁠States… has been one that the core Canadian industries either would be subsidiaries, effectively, of the United States industries, or (Washington) would put in ⁠place terms where those industries would be gradually wound down in Canada and wiped out. Of course, we’re not going to accept those terms,” he said.

Amid the bickering between Canada and the United States, Mexican Economy Minister Marcelo Ebrard met US Commerce Secretary Howard Lutnick ‌on Wednesday (August 2) as the Claudia Sheinbaum administration pushed for progress on US tariffs on cars and steel, a key source of friction in the countries’ trade relationship.

Sheinbaum said in her ⁠daily morning press conference that Ebrard was in the United States seeking agreements on the tariffs, while Mexico’s economy ministry added that he and Lutnick also discussed bilateral trade and regional technological innovation.

The meeting took place on the sidelines of a G20 innovation gathering in Chapel ‌Hill, ⁠North Carolina, which Lutnick was hosting as part of the US-led ministerial.

Mexico and the United States have continued their negotiations tied to the ⁠review of the US-Mexico-Canada (USMCA) trade agreement, amid the uncertainty over the trilateral pact’s future due to the ongoing clash between North America’s two largest economies.

Mexico, for its part, has argued that US tariffs on steel and aluminium are unjustified, apart from objecting to measures affecting automobiles, saying they run against the spirit of ⁠North America’s tightly integrated manufacturing supply chains.