Beyond oil part II: How will Gulf reconstruction impact Asia?

• A Western MNC supplier (and IMA member) shared that their Chinese and Indian clients have paused orders on Gulf construction projects.

Short term, our business has seen a negative impact from the war. Indian and Chinese clients who were coming to us for projects in the Middle East are holding back on investments or delaying them. Practically speaking, it’s hard to start anything right now.

• On the other hand, private capital investors from the Middle East are also declining to finance some new investments in Asia.

The Middle East has been one of the biggest investors into global private equity, private credit, and venture capital to a lesser extent, because they didn’t have as much need to invest at home. Gulf sovereign wealth funds and family offices have been substantial investors in global private markets. In the past two months, this significant source of capital has begun to dry up for new global projects.

In recent years, the Gulf’s ‘pivot to Asia’ made it an increasingly valuable source of patient capital for large development projects.

• Gulf-Asia trade reached a record US$516 billion in 2024, while GCC sovereign wealth funds were directing billions in capital into Indian and Southeast Asian infrastructure, logistics, renewables, and digital assets.
• But perhaps India, and others, need to prepare for the possibility that this could change.

We had a very large opportunity in India with a major private equity firm backed by Abu Dhabi sovereign wealth capital. They decided to sit this one out, suggesting that their investment dollars would be redirected toward opportunities closer to home. Their minimum check is in the category of a $100 million, so it is a significant amount of money that they are pulling out of global markets.

Why it matters: Asian CEOs are preparing for what will happen the day after the war ends. They are not expecting a return to normal.

Two post-war themes emerged:

• The opportunity: What if Gulf domestic construction demand relies heavily on Asia-based suppliers?
• The constraint: What if Gulf capital becomes more competitive for Asian development projects in the future?

The opportunity: With the Gulf states sustaining significant damage from Iranian missiles, the focus will soon shift to reconstruction, once it is safe to rebuild infrastructure.

• While updated stats are hard to come by, it was widely reported that the Gulf Cooperation Council (GCC) countries are facing around $58 billion in repairs to energy infrastructure alone as of April.

There will be more infrastructure spending than there would have been without the crisis. Refineries need repairs; new pipelines are being constructed; additional energy infrastructure will be needed; and new LNG terminals and ports will be required. There will be plenty of money to be made.

A construction firm is already being asked to prepare for an onslaught of new projects by its Chinese and Indian clients.

When the war does end, there is a massive amount of work to be done. Our customers in India and China are already asking us how many people we can deploy to the region on short notice. We expect billions and billions to be spent.

Building resiliency will be the next step.

• Wealthy Gulf states whose economies stark dependency on regional stability will be looking to harden themselves against the next crisis.
• This will mean securing shipping lanes, energy exports, imported food, desalinated water, aviation hubs, and expatriate talent.

The United Arab Emirates and Gulf states will be wondering, even though we are so rich and powerful, at any time our economy can be shut down by a neighbour. Their attitude will become much more like Singapore’s – staying friendly with everyone but seeking to be resilient in water, energy, data centres, and the like – just in case.

The constraint: Gulf capital will likely become more selective and expensive for large-scale projects in Asia.

• This could slow investment in energy and data centres needed to spur the AI transition.

Capital will likely go first to the UAE. The dynamics of funding for private equity and credit markets are changing post-war. Capital pools are shifting, and many people do not yet understand this.

What to watch next.

Signs capital for Asian projects is tightening:

• Whether Gulf sovereign wealth funds formally increase domestic investment allocations.
• Whether large infrastructure and data centre projects in India and Southeast Asia experience financing delays.
• Whether Middle East reconstruction spending expands beyond damaged assets into broader resilience investments in energy, logistics, water, food security, and digital infrastructure.
• Whether Asian governments and private investors step in to fill any resulting funding gap.

Signs that Asian firms and expertise are moving towards the Gulf more than usual, such as:

• Indian engineering firms are designing and managing projects.
• Indian, Filipino, and Southeast Asian migrant labour going out to build projects.
• Chinese firms are providing equipment, construction capability, solar infrastructure, telecoms, rail, and industrial equipment.
• Japanese and Korean firms are supplying advanced industrial systems.
• Western MNCs are providing specialised technology, automation, controls, software, safety systems, chemicals, and project management.

Bottom line: Most commentary on the conflict is focused on oil markets and input shortages.

• But if Gulf investors redirect money home, an unexpected longer-term impact may be a slowdown in much-needed investment in Asia.
• Meanwhile, for infrastructure suppliers, the Middle East could increasingly resemble what China was twenty years ago: a large-scale infrastructure and industrial transformation story.