Gulf States Review U.S. Assets Amid Petrodollar Instability

A conflict involving the United States, Israel, and Iran is destabilizing the petrodollar system and eroding the confidence of Gulf states in U.S. fiscal and military protections. To mitigate potential economic shocks from the war, Gulf nations—which hold approximately US$2 trillion in U.S. assets—have begun reviewing their sovereign wealth fund positions.

Donald Trump, as President of the United States, has seen his escalation with Iran accelerate the fragmentation of the energy-financial bargain. This instability is exacerbated by U.S. public debt exceeding GDP for the first time since World War II. In a significant shift, the United Arab Emirates exited OPEC on May 1, 2026, following U.S. pressure to lower oil prices.

U.S. Treasury Secretary Scott Bessent reported that several allies in Asia and the Gulf region have requested central bank swap lines from the Federal Reserve to maintain dollar liquidity and prevent a disorderly sell-off of assets. Meanwhile, Gulf states have signaled a potential transition toward using alternative currencies, such as the Chinese yuan, for oil trade if dollar liquidity remains disrupted.