Expectations for a Second Trump Administration’s Impacts on Business in the Middle East

Key Takeaways

• Estimates from OPEC and the International Energy Agency project relatively weak demand for oil in 2025, while President-elect Donald Trump has signaled a clear intention to increase U.S. output. This combination is likely to create downward pressure on prices and result in budget tightening by oil-producing states in the Middle East, in turn increasing the risk to government contractors of payment delays and challenges for contracting new projects.
• Opportunities for Middle Eastern investors in the U.S., however, may grow. While it is not clear that American energy firms share Trump’s appetite for new drilling, regional companies such as ADNOC and Aramco are already growing their U.S. portfolios and may see opportunities to expand further. Outside of the energy sector, we expect lower scrutiny of Gulf investors by a Republican-led Congress and Trump-appointed Justice Department, as well as a continued interest in attracting Gulf investment into U.S. technology and artificial intelligence companies.
• Finally, we expect the Trump administration’s approach to export controls to focus more singularly on preventing sensitive U.S. technologies from being transferred to China, with less concern over direct sales of arms and nuclear power technology to allies in the Middle East. Export controls are most likely to impact Middle Eastern customers that have relationships with state-linked entities in China – especially regarding sales of advanced AI semiconductors, but potentially for defense and transport equipment as well.

Oil market dynamics likely to squeeze government budgets

Much has been written about how Donald Trump’s election will affect the political and security outlook for the Middle East, including with regard to the Israeli-Palestinian conflict, the Iranian nuclear program, and U.S. ties with Saudi Arabia, Egypt, and Turkey. But how will a second Trump term affect the economic and business outlook for the region? While President-elect Trump is defined most by his unpredictability, we believe a few themes are likely to play out over the next four years partly as a result of the U.S. presidential election: 1) Continued downward pressure on oil prices, and therefore on Gulf budgets and government spending; 2) Greater openness to and appeals for foreign direct investment in the U.S. from Middle Eastern sovereigns and others from the region; and 3) A more complicated landscape of controls on exports to the region of sensitive U.S. technology such as artificial intelligence (AI) semiconductors, weapons and advanced fighter jets, and civilian nuclear energy.

Perhaps the most consequential implication of the U.S. election for the region relates to the oil markets. Both the International Energy Agency (IEA) and Organization of Petroleum Exporting Countries (OPEC) forecast relatively weak demand for oil in 2025, with the IEA projecting that non-OPEC+ production will increase by 1.5 million barrels per day (bpd) and that global oil demand will grow by 1 million bpd, while OPEC projects global demand growth of 1.5 million bpd against a non-OPEC+ production increase of 1.2 million bpd. However, the sluggishness of China’s economic recovery has surprised analysts before, which has led to lower-than-expected demand for oil from Asia. With President-elect Trump likely to pursue some version of his threat to impose across-the-board tariffs on Chinese exports to the U.S. (whereas he is likelier to adjust plans to impose tariffs on goods from other countries), and Beijing still reluctant to pursue large-scale economic stimulus, the risks to the Chinese economy (and therefore Chinese demand for oil) seem weighted toward the downside.

But it is the supply of oil where most pressure on prices will likely be felt. First, with the vast majority of Iranian oil exports now going to Chinese “teapot” refineries that are not connected to the dollar-based international financial system and therefore mostly beyond the reach of U.S. sanctions, we expect it will be much more difficult for the Trump administration to significantly reduce Iranian oil exports than it was in 2017. Chinese leadership could agree to reduce these imports as part of a grand bargain with the Trump team, but that deal will likely take time to conclude and be difficult for the U.S. to enforce (just like Trump 1.0 trade deals with China). Of course, large-scale conflict between the U.S. or Israel and Iran could take some Iranian oil production offline, but we rate that risk as relatively low given Tehran’s desire to avoid further provoking the U.S. or Israel, Trump’s historic aversion to foreign military conflict, and Israel’s demonstrated preference to strike Iranian missile production facilities and nuclear sites instead of Iran’s energy infrastructure. Second, while U.S. presidents do not directly control U.S. oil production, Trump has signaled a clear intention to facilitate greater supply of both oil and natural gas through faster permitting and expanded lease sales on federal territory. If his administration achieves anything close to Treasury Secretary-designate Scott Bessent’s intention to produce 3 million more bpd, pressure on prices will only grow. And last, tensions within OPEC+ are likely to increase, as production cuts of more than 2 million bpd that have been in place for two years are set to unwind in early 2025. Even if OPEC+ decides to extend these cuts to shore up oil prices, the incentives for individual members to cheat will rise amid price pressure from greater production outside the bloc.

Sustained pressure on oil prices… will likely lead oil exporters to tighten their belts. This means more delays in payments to government contractors, challenges in contracting for new projects or work, and all the downstream effects on the private sectors in the region.”

If the above analysis holds, it would be prudent to expect that oil prices will either stay in the $70-80 per barrel range or move downward. Either scenario would mean significant pressure on budgets of oil exporters in the region and therefore government spending, as most Gulf producers are already operating below the point at which oil revenue equals current spending plans. We have already seen some indications of retrenchment, with Saudi Arabia cutting back or redirecting spending on gigaprojects related to Vision 2030. Although the Saudis and other exporters are now more willing to borrow money on the international debt markets, which helps to smooth out the budgetary effects of fluctuations in oil revenue, sustained pressure on oil prices (with production either staying at current levels or increasing modestly) will likely lead oil exporters to tighten their belts. This means more delays in payments to government contractors, challenges in contracting for new projects or work, and all the downstream effects on the private sectors in the region. While investment behind strategic sectors such as AI, defense, and energy may be relatively insulated, discretionary spending has historically been reviewed in times of austerity and likely will be again. Government entities, multinationals, and investors should all plan ahead.

Opportunities for Middle Eastern investment into the U.S.

While plans to expand U.S. oil and gas production may contribute to budget tightening in the Gulf, they may also create opportunities for investment in the U.S. by regional producers. Analysts currently expect only lukewarm interest in new drilling by American firms in response to Trump’s planned policies, as U.S. production is already at record levels and firms remain driven by the economics of each new project. However, the more favorable regulatory environment and new lease sales may be attractive to Gulf-based producers that are already expanding their U.S. portfolios, especially in LNG. Saudi Aramco announced two U.S. deals in June as part of its strategy to become a “leading global LNG player,” while Abu Dhabi’s ADNOC made its first strategic investment in the U.S. in May in a Texas-based LNG project. Both companies view LNG as important to their long-term plans for the energy transition, and the combination of friendly regulations and cautious expansion from U.S. firms may create opportunities to grow their U.S. portfolios. With increased oil and gas production one of Trump’s key campaign promises, the administration may actively court Gulf investment to help reach the ambitious targets set by Trump and Bessent.

“Openness to Middle Eastern investment in the U.S. is also likely to grow outside of the energy sector – notably in sports, culture, and technology.”

In the tech sector, Gulf governments have set aside hundreds of billions of dollars for investment in artificial intelligence through dedicated funds such as Abu Dhabi’s MGX and the Saudi Public Investment Fund (PIF)’s Alat. Several of the U.S.’ world-leading AI companies, including OpenAI and Elon Musk-owned rival xAI, have looked to the Gulf to secure funding; MGX participated in multibillion-dollar funding rounds for both companies in recent months, while Saudi-based Kingdom Holdings also invested in xAI’s December round. The Biden administration has endorsed the growth of U.S.-Gulf tech investment ties by hosting senior officials from the region – including Saudi Technology Minister Abdullah Alswaha, UAE Minister of State for Foreign Trade Thani Al Zeyoudi, UAE President Mohamed bin Zayed, and UAE National Security Advisor (and prominent technology investor) Tahnoon bin Zayed – on official visits to the U.S. to meet with White House officials and Silicon Valley leaders alike. The Trump administration will continue backing for Gulf investments in U.S. tech as it seeks to incentivize integration of the region into the U.S.’ tech ecosystem, rather than China’s.

In sports and culture, Gulf investors are likely to face far less scrutiny of their investments in U.S. assets than they have in recent years. A Republican-controlled Senate and a Justice Department staffed by Trump appointees are unlikely to oppose deals that have Trump’s backing, such as the planned merger between the PGA Tour and PIF-owned LIV Golf. Trump’s friendly relations with regional leaders will also provide some level of political cover for U.S. sports businesses that are interested in Gulf money but wary of reputational backlash over the human rights records of Gulf governments. Regional investment in U.S. sports assets has grown substantially in recent years, with high-profile deals by Abu Dhabi’s Mubadala, the Qatar investment Authority, and Dubai national airline Emirates across tennis, basketball, and hockey within the past eighteen months. With new National Football League (NFL) rules now allowing minority ownership by private equity investors and the U.S. preparing to host a World Cup in 2026, Gulf investors are likely to examine further opportunities in U.S. sports and culture and will be encouraged by tacit support from the White House, as well as potential economic growth from anticipated Trump tax cuts. 

Lighter export controls on arms and nuclear energy; continued focus on China risk

Finally, we expect a second Trump administration to alter the array of export controls on key U.S. technologies to the Middle East, with a more permissive approach to the direct export of arms and nuclear energy, but a potentially more complex landscape for Middle Eastern customers that have relationships with state-linked Chinese entities. In the defense sector, we expect the Trump team to take a more liberal approach to foreign arms deals, including to key U.S. allies in the region. Trump’s nominee for National Security Advisor, Congressman Michael Waltz (R-FL), led a Congressional task force on foreign military sales that recommended a series of reforms in February 2024 to expedite arms sales and allow the U.S. to more easily share weapons with allies. Such reforms would continue a trend from the first Trump administration, which unilaterally reinterpreted compliance with the Missile Technology Control Regime (MTCR) to allow greater drone sales (the Biden administration has kept this reinterpretation in place). Both Saudi Arabia and the UAE are likely to welcome this approach, not only for defense collaboration but also to enable greater U.S. investment and partnership in their budding space sectors, where launch technology is often subject to MTCR and other export controls.

Trump is also likely to continue his support for the sale of nuclear energy technology to Saudi Arabia. The Trump White House faced criticism in 2019 over a series of secret authorizations for U.S. companies to sell nuclear power technology and assistance to the Kingdom. Since then, nuclear power assistance has become a pillar of U.S.-Saudi discussions over a mutual security pact. Waltz has downplayed the risk that such assistance would contribute to a nuclear arms race in the region, expressing support for a framework with safeguards around uranium enrichment or access by non-U.S. parties. If a Saudi-Israel normalization deal appears out of reach to the Trump team, we expect discussions to refocus on a U.S.-Saudi deal in which Washington would commit to an enhanced defense relationship (likely short of a mutual defense treaty) and potentially support for a civilian nuclear energy program in exchange for increased Saudi purchases of U.S. technology and commitments to reorient itself away from China.

The key concern for the Trump team in the export of sensitive technologies – and especially for artificial intelligence hardware – will continue to be the risk of leakage to China. For the time being, we expect mostly continuity in the “small yard, high fence” approach taken by the Biden administration, which seeks to ban export of a small group of essential items (such as advanced AI semiconductors) to customers that cannot guarantee their protection from state-linked Chinese entities. However, Trump nominee for U.S. Trade Representative, Jamieson Greer, has advocated in recent Congressional testimony to expand export controls on China to a greater range of goods and industries, including legacy chipmaking equipment, aircraft, and transport equipment. If that position becomes policy, it could impact military sales as well – while the first Trump administration sought to sell F-35 fighter jets to the UAE, growing UAE-China military ties may give the next White House pause in resuming that effort. 

It is worth keeping in mind that Trump’s policies towards the Middle East are likely to evolve, both because of the president-elect’s own unpredictability and due to volatility within the region. Key variables are likely to include the further development of Gulf state ties with China, the potential for a renewed deal with Iran that removes pressure on its oil output, and the Trump administration’s response to renewed instability in the region (such as the recent toppling of the Assad regime in Syria). In the short term, however, businesses should prepare for budgets cuts by the region’s oil producers, a more welcoming U.S. landscape for Gulf investors, and a further focusing of export controls on risks posed by China.

About DGA Group

DGA Group is a global advisory firm that helps clients protect – and grow – what they have built in today’s complex business environment. We understand the challenges and opportunities in an increasingly regulated and interconnected world. Leveraging the expertise and experience of our team at Albright Stonebridge Group, a leader in global strategy and commercial diplomacy, and a deep bench of communications, public affairs, government relations and business intelligence consultants, we help clients navigate and shape global policy, reputational and financial issues. To learn more, visit dgagroup.com.

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