Capital outflow from Gulf States undermining their stability
Fri 7:36 pm +00:00, 1 May 2026The begging bowls are coming out. These are high spending countries experiencing very steep reductions in their cash in flow. They either sell off assets or raise cash. All their currencies are pegged to the dollar, the currency of the country that was the financial hyperpower, the USA. They won’t break the link to the dollar or they could see rapid depreciation in their currencies. They have little choice but to run down their reserves…fire sales on a huge scale which could undermine confidence wordwide, an especially in the USA. So they ask the USA for dollars. UAE was first to arrange a swap. Now all the others are doing the same, in an attempt to prevent a crisis developing. These countries are all experiencing capital outflow.
Hong Kong had been receiving about $40 billion every week, which was capital outflow from these countries, especially from UAE. Not only Hong Kong. Singapore is also receiving funds in large amounts. Other money is going into crypto.
Once UAE left OPEC and Hormuz is opened, UAE would try to export as much oil as it could, or alternatively, the USA agreed to fund a swap with UAE on condition that they quit OPEC, and OPEC PLUS and later leave the BRICS. That would give a diplomatic victory toDonald Trump. (El Pais article)
The most vulnerable state is Bahrain. It has high debt to gdp ratio, thin reserves and population which is 80% Shia in conflict with Sunni Royalty. Qatar and Kuwait are midway. UAE and Saudi are the strongest financially. Saudi is the least affected by closure of Hormuz, having access to the Red Sea.
Britain is sustained to a great extent by inflows from Gulf States, as is the USA, as they are big buyers of Treasuries. If that funding stops, longterm financial stability is threatened. If the Gulf States break with the dollar, they would need to turn to China.
The crisis across Europe is also deepening. Kallas says EU must stop talking to the Russians. How willall this resolve?
