The world’s largest asset manager said the shift was creating opportunities across infrastructure and private markets, as Gulf states increasingly move from being primarily exporters of capital to becoming destinations for international investment.

“The GCC is equipped with a reasonably solid balance sheet position, but at the margin, our analysis suggests that we are going to see something like USD 100 billion in capital that may have flowed out is going to stay here,” Ben Powell, chief investment strategist for the Middle East and Asia-Pacific at the BlackRock Investment Institute, told Zawya.

BlackRock manages more than USD 175 billion in the Middle East, according to the asset manager, giving it a substantial footprint in a region where governments are deploying sovereign capital to accelerate economic diversification.

The potential capital shift comes as GCC governments expand spending on infrastructure, industry and digital assets while seeking to monetise or privatise state-owned businesses.

BlackRock estimates that GCC countries will invest about USD 2.1 trillion through 2030, with more than 80% of that spending outside upstream oil and gas. Its latest regional analysis identifies energy and industry, strategic trade infrastructure, digital infrastructure, urban development, and human and environmental resilience as major areas of investment.

The infrastructure opportunity extends well beyond conventional transport projects. BlackRock’s estimate includes ports, logistics networks, pipelines, power and water infrastructure, data centres and other assets designed to improve resilience in the face of disruptions to trade and energy flows.

Digital infrastructure alone accounts for an estimated USD 323 billion of the GCC’s strategic investment cycle through 2030, while energy, resources and industry represent about USD 735 billion. Strategic redundancy – including alternative trade routes, ports, power and water projects – accounts for another USD 660 billion.

The changing role of Gulf sovereign wealth funds is also central to the trend.

Ayman Daif, managing director and head of Aladdin business development for the Middle East, Central Asia, Africa and India at BlackRock, said sovereign investors were increasingly becoming “market architects”. Rather than simply allocating capital, they are working with regulators, international companies and asset managers, while anchoring funds and partnerships designed to develop local economies.

That evolution is already visible in infrastructure. In May, BlackRock’s Global Infrastructure Partners (GIP) joined Singapore’s Temasek, Abu Dhabi wealth fund L’IMAD and ADNOC in a partnership targeting up to USD 30 billion of investments across the Gulf and Central Asia. The partnership covers energy, transport, logistics, digital infrastructure, water and waste management.

More recently, GIP and Qatar’s Lesha Bank signed a memorandum of understanding under which Lesha intends to invest more than USD 1 billion alongside GIP, with the partners targeting infrastructure and real-asset opportunities in the GCC and international markets.

The shift is also changing the composition of private-market activity. BlackRock said Middle Eastern sovereign wealth funds allocate about 43% of their exposure to private capital, compared with 35% among peers elsewhere. The proportion of Middle Eastern limited partners that are positive on or considering private-equity mandates has risen from 70% in 2019 to 83% in 2026.

Saudi Arabia and the UAE are driving much of this activity. BlackRock said fundraising in the region has shifted significantly towards private equity, with private-equity fundraising rising from USD 100 million in 2015 to USD 4.5 billion so far in 2026. Real estate fundraising, by contrast, fell from USD 4.2 billion in 2021 to USD 100 million last year.

The changing capital flows also coincide with efforts by Gulf governments to open more state-owned assets to private investors. Energy, utilities and water are among the sectors where privatisation and asset monetisation are creating opportunities for both mid-market investors and large infrastructure funds.

Powell said the trend was not driven by an urgent need to find alternatives to US assets, noting that US Treasuries would remain important in global portfolios. Instead, investors are gradually diversifying into private credit and emerging-market bonds, while Gulf allocators increasingly deploy capital domestically.

For global asset managers, the development offers a growing pipeline of investable Gulf assets. For the GCC, it represents a further evolution of the region’s role in global capital markets – from a major source of sovereign investment abroad to a market capable of retaining more capital and attracting international investors into its own transformation.

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The push is increasingly focused on the Gulf, but is also extending into North Africa and other emerging markets.

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The figure, covering 55 listed GCC banks, was 2.6% higher than in the first quarter and 11.6% above the level a year earlier, according to Kamco Invest.

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In its latest report on the African sukuk market, the credit rating agency said outstanding African sukuk crossed USD 7 billion in August, up 16% year-on-year.

Fitch said that sukuk is becoming a new way for some African governments to get funding, helping them to move away from traditional loans and attract interest from banks and investment funds in the GCC and Africa.

Egypt accounts for 48% of Africa’s outstanding sukuk, making it by far the continent’s largest market, supported by regulatory reforms and closer economic ties with the GCC. Around USD 1 billion of African sukuk has been issued so far in 2026, mainly by Benin and Egypt, a sharp slowdown compared with the USD 3.3 billion issued across the full year in 2025.

The decline in fresh issuance this year underscores how heavily the market still depends on a narrow group of sovereigns that are both willing and able to access the instrument. Fitch noted that enabling regulation for sukuk remains absent in most African countries, leaving a legal and structural vacuum that discourages new entrants.

Domestic Islamic financial institutions, which typically serve as both key investors and potential issuers in more established sukuk markets, are either small or non-existent across much of the continent.

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The report, titled “The Islamic Finance Connector Era,” finds that Islamic finance assets grew 13% in 2025 alone, with the sector now spanning close to 100 jurisdictions. Sukuk outstanding stood at USD 1 trillion in 2025, while Islamic banking remains systemically important in 15 countries, according to LSEG analysis based on the Islamic Finance Development Indicator cited in the report.

Standard Chartered argues that the next phase of expansion will be defined less by how much capital is available and more by how effectively institutions can move that capital across borders.

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BMEP leverages Brookfield’s expertise through its offices in Riyadh and across its broader global network to pursue buyouts, minority growth equity and other investment opportunities across a range of sectors, including financial, business and consumer services, industrials, technology and healthcare.

As per the venture, capital from the fund will be allocated to investments in the Middle East, with a focus on the Gulf Cooperation Council (GCC) in high-growth markets. The fund has a goal of allocating 50% of its investments in Saudi Arabia, as PIF continues to attract capital inflow.

“PIF is an anchor investor in the newly launched fund, as part of its strategy to maximise returns and deliver long-term value through global partnerships. PIF partnerships are key to leveraging investment opportunities and fostering economic development, while enabling the development of local talent and capabilities,” the Saudi sovereign wealth fund stated.

“The investment marks another step in PIF’s strategy to further deepen and diversify the Saudi capital market by partnering with global investors on commercially attractive opportunities, empowering financial institutions, broadening financing options for local businesses and introducing new products,” it added further.

“Brookfield is committing USD 500 million to the fund consistent with its longstanding approach of ensuring alignment with its partners. As part of this initiative, Brookfield will make the Brookfield Academy available in Saudi Arabia. Founded in 2019, the Brookfield Academy provides interactive learning opportunities for Brookfield partners’ professionals,” the Canadian firm said.

Yazeed A. Al-Humied, Deputy Governor and Head of MENA Investments at PIF, said, “PIF continues to build upon Saudi Arabia’s position as a global hub for investments, through partnering with international industry leaders to drive product innovation and ensure further access to local opportunities. Our partnership with Brookfield is designed to help anchor international private equity into Saudi Arabia and the region. It will also accelerate deal flow while continuing to bring world-class expertise to the local capital market ecosystem.”

Bruce Flatt, CEO of Brookfield Corporation, said, “We are grateful for the collaboration with PIF and our other strategic anchor partners, reflecting the global confidence and strong demand for private equity opportunities in Saudi Arabia and the region. Brookfield has been active in the Middle East for nearly three decades, and we bring deep local investment expertise, local networks and an owner-operator approach to transforming high-quality businesses. We see a compelling opportunity to partner with businesses across the region and position them for long-term growth.”

Through the BMEP, PIF further consolidates its position as one of the world’s most impactful investors, with a long-term investment strategy to further drive the economic transformation of Saudi Arabia and deliver sustainable financial returns.

Considered as one of the largest foreign direct investors in the GCC, Brookfield has been pumping significant capital into the region since 2015. It has built a portfolio of over USD 16 billion of managed assets across private equity, real estate and infrastructure in this part of the world.

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That assumption has been tested more severely in 2026 than at any point in recent memory, and the Gulf’s response is now visible in trucks, pipelines and ports rather than just in policy papers.

In the second week of July, Dubai-based DP World added 700 lorries to its regional fleet, a move that will support up to 35,000 additional trips a month across the GCC.

The company said the fleet would serve first, middle and last-mile logistics, covering both containerised and non-containerised cargo, and that it forms part of a wider effort to build bonded, customs-controlled road corridors linking east coast gateways directly to Jebel Ali Port.

DP World’s logistics chief for the GCC, Raveen Guliani, framed it as a response to what customers now demand. He claims they need certainty and reliability in a region where the sea route can no longer be taken for granted.

That single announcement is a small piece of a much larger shift. Since fighting between the United States and Iran erupted in February and repeatedly flared since, Gulf states and the companies operating within them have moved from treating Hormuz contingency planning as an occasional exercise to treating it as core infrastructure strategy.

The question now being asked in boardrooms from Riyadh to Abu Dhabi is not whether to reduce dependence on the strait, but how far that dependence can realistically be cut, and how quickly.

A war that keeps reopening the wound
The scale of the disruption explains the urgency. Iran’s closure of Hormuz to non-Iranian vessels forced Gulf producers to shut in as much as 12 million barrels per day of oil at the peak of the crisis. Iraqi output collapsed from around 4.3 million barrels a day to under 1.5 million in May.

Kuwait declared force majeure. Bahrain’s Sitra refinery was struck repeatedly. A ceasefire framework reached in June briefly restored some shipping, but it has proved fragile.

Strikes and counter-strikes resumed in July, tankers were hit inside the strait, and daily transits have fallen from around 135 ships before the war to fewer than 40 in recent weeks, according to shipping data cited in regional reporting.

Washington has since said it will reimpose a naval blockade of Iranian ports and floated the idea of tolls (20% transit fee) for “safe passage” of ships through the strait, a proposal Tehran has publicly haggled over rather than rejected outright.

As per the latest updates, the Donald Trump administration has dropped the idea, pursuing instead trade and investment agreements with Gulf states.

Every time the waterway closes or comes under threat, the economic cost lands immediately on Gulf exporters and on global energy and shipping prices. That repeated shock, rather than any single event, is what has pushed the region towards what might be called a “Hormuz Plus One” strategy.

The idea is to keep using the strait when it is open, but build enough parallel capacity on land and along the Red Sea and Gulf of Oman coasts that a closure no longer means an economic stop.

Saudi Arabia’s pipeline bet
Saudi Arabia’s answer predates the current war by more than four decades. The East-West Pipeline, also known as Petroline, was built in the 1980s during the Iran-Iraq war specifically to move crude from the Kingdom’s eastern fields to the Red Sea port of Yanbu without touching Hormuz.

It has proved its worth this year with Aramco pushing the line to its full capacity of seven million barrels a day within days of the first strikes, and Yanbu exports reaching around five million barrels a day since.

That capacity, however, only partly offsets what Hormuz can carry. Roughly 15 million barrels a day of crude used to move through the strait before the war, meaning even a maxed-out Petroline covers well under half of that flow.

This is why Riyadh is reportedly in preliminary talks to expand the pipeline’s capacity by a further one to two million barrels a day, according to sources cited by Reuters, potentially with a smaller secondary line dedicated to refined products.

The project would take years and cost billions, and would require changes to how Saudi crude is priced for international buyers.

Crucially, the Kingdom is also discussing whether the expanded system could carry crude on behalf of neighbours who have no pipeline options of their own, Kuwait, Bahrain and Qatar among them. Kuwait’s state oil company has confirmed talks are under way with both Saudi Arabia and the UAE to find space for its barrels.

The UAE goes further, and faster
If Saudi Arabia’s approach is decades-old infrastructure being stretched, the UAE’s is a newer and broader build-out. Abu Dhabi’s existing Habshan-Fujairah pipeline already carries up to 1.8 million barrels a day of crude to the Gulf of Oman coast, bypassing Hormuz entirely. ADNOC is fast-tracking a second pipeline along the same route, reportedly around half complete, aimed at doubling that capacity by 2027.

What is more striking is that the UAE strategy has moved well beyond oil. With container traffic at Jebel Ali, Dubai’s flagship port and one of the world’s largest, having fallen by as much as 95% at the height of the Strait’s closure, DP World is now in talks to build an entirely new multipurpose port and container terminal at Fujairah, on the Gulf of Oman coast, according to reporting by the Financial Times. Cargo landed there would move onward to Dubai, Abu Dhabi and other commercial centres by road, dovetailing directly with the kind of trucking capacity DP World has just expanded.

Parallel expansion is under way at Khor Fakkan, where Sharjah-based Gulftainer has committed roughly two billion dollars to grow capacity, and at Dibba, with UAE officials scoping out at least one further harbour along the same coastline.

The government’s own language leaves little ambiguity about intent. UAE Minister of Foreign Trade Thani Al Zeyoudi has said the country is aiming for “Zero Hormuz Dependency,” regardless of whether the Strait remains open. New rail links, roads and pipelines are being built to connect these eastern ports and fields to the country’s population and industrial centres, an implicit acknowledgement that ports alone cannot absorb the shift without inland logistics to match.

Where the strategy runs into limits
Even so, “Hormuz Plus One” is not the same as “Hormuz Optional.” Analysts note that the conflict has focused regional minds on the risks of relying on a single chokepoint, but the physics of oil and gas infrastructure impose hard limits on how far that reliance can fall. Kuwait, Bahrain and Qatar have no pipelines of their own and depend entirely on Saudi or Emirati goodwill and spare capacity.

Iraq’s northern pipeline to Turkey remains dogged by disputes and runs well below its potential.

Qatar’s economy rests overwhelmingly on liquefied natural gas (LNG), which cannot simply be piped overland in the way crude can; Doha is examining several alternatives, including routing through Saudi territory, but none offers anything close to a full substitute for seaborne LNG carriers transiting Hormuz.

Containerised trade faces its own version of this problem. Trucking and rail can absorb meaningful volumes, DP World’s overland corridors have already moved more than 350,000 twenty-foot equivalent units since the disruption began, but that is a fraction of the more than 15 million containers Jebel Ali alone handles in a normal year.

Road networks, customs posts and warehousing in Fujairah, Khor Fakkan and Dibba are already under visible strain from the diversion so far, with weekly container movements through Khor Fakkan rising roughly eightfold and daily truck traffic climbing from around 100 vehicles to close to 8,500.

A structural shift, not a full escape
What is emerging, then, is not an exit from Hormuz but a hedge against it. Saudi Arabia’s pipeline expansion and the UAE’s port and pipeline build-out will, over the next two to three years, meaningfully raise the volume of oil that can move without touching the strait, and DP World’s road and rail investments will do the same for containerised goods.

Together, these efforts could shave a serious portion off the economic damage of any future closure, particularly for crude oil, where physical bypass infrastructure already exists and is being expanded.

But total independence from Hormuz remains out of reach for the foreseeable future, especially for gas, for smaller Gulf states without their own pipelines, and for the sheer volume of containerised trade that still needs a deep-water port inside the strait to function efficiently.

The Gulf is not abandoning Hormuz. It is building a costly, overlapping insurance policy around it, one truck, pipeline and port terminal at a time, in the hope that the next time tensions flare near Bandar Abbas, the region’s economies will not have to hold their breath quite so completely.

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As per Bashar Al Natoor, managing director and global head of Islamic Finance at Fitch Ratings, the Southeast Asian country has remained a unique “local story” that has successfully buffered itself against external shocks, including geopolitical volatility.

“During the crisis, the Gulf Cooperation Council (GCC) debt markets saw minimal dollar issuances, rising yields, and tighter liquidity, while Malaysia’s market remained resilient with steady foreign investor participation, growing non-sovereign issuance, and innovations like tokenized sukuk, supported by strong ringgit stability and regulatory development. It’s impacted by its own local story,” the senior official told the StarBiz.

Al Natoor expects a resilient debt capital market that will continue to expand as envisioned in Malaysia’s local Capital Market Master Plan (2026 to 2030). Fitch also predicts the nation’s debt capital market (DCM) to expand modestly to reach USD 640 billion outstanding by the 2026-end.

“This growth is anchored by a deep domestic investor base, stable yields, and the ringgit’s performance as one of Asia’s most resilient currencies. Unlike the GCC, where US dollar issuances were scarce during the height of the conflict, activity in the Malaysian market continued almost as normal,” the ratings agency remarked.

“A key trend for the remainder of 2026 is the strategic shift from sovereign to non-sovereign debt. While the Malaysian government is engaging in fiscal consolidation, aiming to reduce federal debt to 60% of GDP by 2030, the private sector is picking up the mantle as well. Non-sovereign issuance rose by 17% year-on-year in the first five months of 2026, accounting for 68% of total DCM activity,” said Bashar, terming the transition a sign of market maturity.

“We expect more non-sovereign to go and issue into the market, and I think that stands out,” he stated, noting that corporate and bank issuers are increasingly defining the market’s trajectory.

“Banks remain the largest non-sovereign contributors, often using sukuk for refinancing and opportunistic funding. The local Islamic banking sector, meanwhile, continues to outpace conventional growth. Islamic banking assets grew by 7% to reach USD 312 billion by the end of 2025, while conventional assets grew by only 4%,” Fitch said further.

Talking about the growth of the Islamic financial ecosystem in Malaysia, the industry now represents 44% of the Southeast Asian country’s total system loans, nearing the Anwar Ibrahim government’s 50% target.

Bashar attributed this success to the most “evolved ecosystem” in the world, which integrates issuers, investors, takaful (Islamic insurance), haj funds, and pension funds like the Employees Provident Fund (EPF) into a cohesive syariah-compliant framework.

“Malaysia has cemented its position as the world’s largest environmental, social, and governance (ESG) sukuk market, holding a 31.6% share of global outstanding ESG sukuk as of mid-2026. ESG-linked debt in the country rose by 44% to USD 20 billion, heavily supported by government tax incentives. Sukuk remains the dominant vehicle for these sustainable investments, accounting for 94% of total ESG debt issuance,” Fitch noted.

Malaysia is also taking a lead role in terms of innovating in the industry. The Southeast Asian nation saw its first tokenized sukuk issuance in the first half of FY 2026. New regulations for private debt will likely further enable this niche.

Bashar, however, warned the use of technology could present a challenge for Malaysia’s Islamic financial ecosystem, as technological advancements are vital for maintaining a competitive edge.

“While the Islamic capital market is domestic-centric, foreign interest remains stable. Foreign holdings of government debt stood at 21.6% at the end of the first quarter of financial year 2026, a high figure compared to other Organization of Islamic Cooperation countries,” he told the StarBiz.

To further attract international capital, particularly from the GCC, the Anwar Ibrahim government plans to launch its first wakalah bi al-khadamat sukuk in 2026. This will bridge the gap between Malaysian and GCC syariah interpretations, potentially opening new inflows of Middle Eastern investments into the Southeast Asian nations.

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As per the American-British credit rating agency, Islamic banking assets in the Southeast Asian country amounted to just USD 44 million as of end-2025, underscoring the archipelagic nation’s still nascent position in a regional market dominated by Malaysia, Indonesia and Brunei.

“Regulators in the Philippines are developing its nascent Islamic finance ecosystem, recently through sukuk guidelines,” Fitch said.

Talking about the Philippines’ efforts towards becoming an Islamic finance growth engine, the country issued its maiden USD 1 billion sovereign sukuk in 2023, which carries a BBB rating. It now has five licensed takaful operators (providers of Shariah-compliant insurance).

ASEAN’s Islamic finance industry exceeded USD 1 trillion in Q1 2026, supported by large Muslim populations, government commitments, accommodative regulation, halal economy growth and digitalisation.

As per Fitch, while the sector’s growth across Southeast Asia remains uneven, tailwinds like stronger links with Gulf Cooperation Council (GCC) countries and closer integration within ASEAN could help the industry players to expand market access, draw investments and support financial inclusion.

Fitch also cited recent agreements by the United Arab Emirates (UAE) with Indonesia, Malaysia and the Philippines that are aimed at deepening Islamic finance collaboration between the countries.

“For the Philippines, cross-border cooperation may provide additional momentum. Still, the Philippines remains far behind more established regional markets. Indonesia’s Islamic banking assets reached USD 61 billion at end-January, while Brunei’s stood at USD 11 billion as of end-2025. In Malaysia, Islamic financing already accounted for 44% of total banking system financing by the 2025 end,” Fitch noted.

While Malaysia leads ASEAN’s Islamic fund industry with around USD 70 billion in assets under management (AUM), Indonesia has emerged as one of the world’s largest sukuk issuers. Brunei, on the other hand, has the highest Islamic finance market share in most verticals, with Islamic bank assets equivalent to about 70% of its banking sector.

“Across ASEAN, about 49% of Islamic finance assets consist of sukuk outstanding, followed by Islamic banking assets at 41%, Islamic funds’ assets under management at 8% and takaful assets at 2%. Nearly half of global sukuk outstanding now comes from the ASEAN. Malaysia ranks first globally, while Indonesia ranks third, with most issuance denominated in local currencies,” Fitch observed.

Also, all Fitch-rated dollar ASEAN sukuk were investment grade, or within the BBB category, as of end-April, with no defaults recorded in the past four years. However, Fitch said that the overall credit environment has become more challenging, with 63% of the region’s sukuk issuers on negative outlooks following the revisions of the sovereign outlooks of Indonesia and the Philippines.

And last but not least, geopolitical tensions, particularly the Iran war, could affect sovereigns and sukuk issuers through higher energy prices, heavier subsidy burdens, weaker currencies, wider credit risk premia and tighter external funding conditions.

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