Kuwait Taps Sovereign Wealth Fund Amid US-Iran War

The government of Kuwait issued a decree allowing it to borrow from the Future Generations Fund to stabilize state finances. The sovereign wealth fund, managed by the Kuwait Investment Authority and valued at over $1 trillion, will be used to offset a surging fiscal deficit and a projected 7.9% economic contraction in 2026. This downturn is driven by the closure of the Strait of Hormuz during the ongoing war between the United States and Iran.

Under the amended 1976 law, the government must prioritize loan repayments during budget surpluses and cannot write off the debt without new legislation. The move comes as regional trade is severely disrupted, slumping Kuwaiti exports and severing Iranian oil shipments.

In late August, the United States launched Operation Economic Outcast to isolate the Iranian economy through a naval blockade and secondary sanctions. While the United States Department of the Treasury has targeted smaller entities, it has avoided penalizing China, which remains the largest customer for Iranian oil. Iran has attempted to maintain economic resistance by stockpiling foreign currency and using non-Gulf trade routes, but the state continues to face severe fuel shortages and soaring inflation.