The Iran war is stress-testing the US-Saudi petrodollar bargain

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WHAT WE’RE TRACKING TODAY

Major players are still chasing the June IPO window

Good morning, all. We’re wrapping up the week with a look at how the Iran war is putting a massive stress test on the decades-old US-Saudi petrodollar bargain. We also take a step back to 2025 to examine a rare market decoupling, where the TASI lagged its GCC neighbors for the first time in a decade, and dive into Sico Capital’s playbook for navigating that shift.

Happening today

It’s day two of the FII PrioritySummit, which is taking place in Miami Beach’s Faena Hotel, bringing together over 2k global leaders, CEOs, and tech luminaries under the theme “Capital in Motion.” The three-day event dives into the future of stablecoins, the ROI of AI in a fragmented global economy, and regional resilience.

PSAs

No penalties or fees for expired visa holders: Holders of visas that expired as of 25 February can depart the Kingdom directly without incurring any fees or overstay fines. Meanwhile, those with visit visas will be able to extend them until 18 April upon their host’s request.

WEATHER- Gale-force Saudi: Red alerts have been issued as thunderstorms hit most regions of Saudi Arabia through Saturday, with 60 km/h winds, dust storms, flash floods, hail, high coastal waves, and even possible tornadoes.

Riyadh: 26°C high / 17°C low;
Jeddah: 26°C high / 20°C low;
Makkah: 30°C high / 20°C low;
Dammam: 26°C high / 18°C low.

Watch this space

CAPITAL MARKETS — A handful of major players are still pressing ahead to beat a June regulatory deadline, even as investment banks are advising clients to write off 1H 2026 due to a geopolitical markdown in valuations.

Who’s pushing ahead: Both Mutlaq Al Ghowairi Contracting and Arabian Dyar are reportedly looking to IPO before their CMA approvals expire in late June, Bloomberg reports, citing people it says are in the know.

For a sense of scale: Arabian Dyar is said to be gunning for an SAR 16 bn valuation — higher than what some banks are pitching, sources told the business information service. Meanwhile, Mutlaq Al Ghowairi, which was originally targeting a post-Eid listing window, is now looking at May for an IPO that could value it between SAR 12-15 bn.

The clock is ticking: If they don’t list by June, both companies face the grueling task of restarting a regulatory process that can take over eight months to navigate.

Are more companies on the way? Homegrown quick-delivery startup Ninja is said to be sounding out the market for a potential IPO as early as this year. Executives reportedly sat down with investors in London earlier this month, with a decision expected in the coming weeks.

They would be landing in a market that fared better than its peers. Tadawul held up amid the Iran war jitters, with its energy-heavy TASI getting a lift from higher oil prices, supporting heavyweights like Aramco.

AVIATION — Jazeera Airways ups KSA-based capacity: Kuwaiti low-cost carrier Jazeera Airways is leveraging Saudi hubs to add some 200k seats — around 40% of its pre-war capacity — to its network by next month, Reuters reports. With Kuwait’s airspace closed due to the US-Iran war, the airline began operating from Al Qaisumah and Dammam, using only 11-12 of its 23 jets, Chief Commercial Officer Paul Carroll is quoted as saying.

Data point

3.2% — that’s the y-o-y increase in the Kingdom’s operating revenues index in January, driven by gains across key sectors including retail, construction, and financial services, according to Gastat’s latest report (pdf). On a monthly basis, the index rose 1.8% compared to December.

The uptick was supported by an 8.7% annual rise in wholesale and retail trade, increases in construction, and double-digit growth in financial and information and communication activities. Meanwhile, issued building permits dropped sharply by 26.8% m-o-m, signaling some slowdown in construction activity.

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The big story abroad

Washington maintains that peace talks with Iran are ongoing, despite Tehran roundly rejecting the ceasefire proposal put forward by the Trump administration. The Islamic Republic is reportedly looking to secure assurances that the US-Israeli assault will not resume, reparations for war-related damage, and recognition of its authority over the Strait of Hormuz.

Meanwhile, in the world of social media: Meta and Google were found liable for creating social media platforms harmful to teenagers. The plaintiff claimed that using YouTube and Instagram caused them anxiety, depression, and body dysmorphia. Social media companies now face USD bns of litigation risk as this case provides a roadmap for future claims regarding platform safety and minor well-being.

And on Wall Street: US investment bank Jefferies Financial Group failed to meet analysts’ estimates for 1Q 2026, despite seeing its net income rise 22% y-o-y. Its biggest losses were attributed to private credit mishaps related to Market Financial Solutions and First Brands Group. Despite the turmoil stemming from the war on Iran, Jefferies execs still expect robust M&A and IPO activity and dealmaking in 2026.

The Petrodollar’s “perfect storm”

The foundational pact of the modern Middle East — US military protection in exchange for exclusive, USD-denominated oil pricing — is facing its most serious test since inception. With Iran’s retaliatory drones and missiles inflicting damage on GCC infrastructure, the physical disruption to supply is proving that the US security umbrella can no longer ensure the region’s safety.

Why it matters: The petrodollar is the bedrock of the USD’s status as the world’s reserve currency. GCC economies sit on roughly USD 800 bn to support their USD currency pegs, alongside sovereign wealth funds managing over USD 6 tn heavily weighted in US assets. If GCC capitals decide the US can no longer ensure their physical security, the financial architecture that relies on USD recycling channels can be jeopardized, Reuters’ Mike Dolan writes.

“The huge strategic importance of the Middle East to the USD’s role as the world’s reserve currency should not be underestimated. The current conflict may be the perfect storm for the petrodollar,” Mallika Sachdeva, strategist at Deutsche Bank Research Institute, wrote in a note (pdf).

What comes next: We are watching the acceleration of a permanent shift in global trade invoicing. If GCC wealth funds are forced to liquidate USD assets to fund domestic reconstruction, or if consumer nations rapidly transition away from globally traded maritime fossil fuels to domestic alternatives, the geopolitical premium of Middle East oil — and the USD grip on it — will permanently shrink.

The history

The decades-old arrangement was formalized in February 1945 aboard the USS Quincy, where US President Franklin D. Roosevelt and King Abdulaziz bin Saud agreed to price oil in USD and invest surpluses in USD assets, in exchange for security assurances from Washington. That agreement survived the Cold War, the 1991 Gulf War, and decades of regional instability.

BUT- The cracks have been showing for years. An Iranian drone attack in 2019 temporarily knocked out half of Saudi Aramco’s production — 5% of global crude — and the Trump administration responded with no military action.

Today’s conflict took that localized anxiety and turned it into a widespread reality. “If this war has shown anything so far, it is that allying yourself with the US no longer [ensures] security,” Jim O’Neill, former Goldman Sachs economist, said earlier this month.

The eastward shift

While the war may be a catalyst, the structural realities of the global oil trade had already shifted eastward long before the first missile was fired. The customer base for Gulf crude has changed as the US is now effectively energy independent following rapid advances in shale oil production.

Where things stand: Saudi sells four times as much oil to China as it does to the US, and a massive 85% of crude oil from the Middle East is now exported to Asia. The Kingdom has already begun a push to localize its defense industry, and is quietly experimenting with non-USD payment architecture. Add a failure of military protection to the mix, and the rationale for exclusive USD pricing is thrown into doubt.

The war could accelerate this shift

The conflict might accelerate the fragmentation of trade routes, as well as currency pricing. The inability to ensure maritime security is forcing a chaotic, bilateral approach to keeping the oil flowing. Iran is reportedly negotiating with several countries to allow tankers to safely pass through the chokepoint — but only if the oil is paid for in Chinese CNY.

ALSO- Massive capital pools are now at risk of reallocation. The GCC’s sovereign wealth funds currently manage more than USD 6 tn, largely invested in US bonds, private equity, and equities. However, the physical damage to local infrastructure, combined with the economic scarring to regional tourism, aviation, and finance, may require significant capital to repair — and the costs will keep increasing the longer the conflict continues. The GCC might need to repatriate portions of these USD savings to fund domestic recovery efforts, introducing fresh selling pressure on US Treasuries.

What’s next?

While the 1970s oil shocks drove the West to build the Strategic Petroleum Reserve and explore the North Sea, this time is entirely different. Traditional US allies — think Europe, Japan, and South Korea, the ones highly exposed to the Strait of Hormuz closure — are realizing that maritime energy supply chains are a critical vulnerability.

It’s not far-fetched to expect an accelerated policy pivot away from globally traded fossil fuels. Consumer nations can double down on subsidized renewable energy infrastructure and revive nuclear power generation programs. Heavy industry and military logistics will still require hydrocarbons for decades, but the marginal demand growth will be structurally impaired.

The gist? A world that relies on domestic renewables and nuclear power is a world with reduced energy deficits in Asia and Europe, and reduced energy surpluses in the Middle East. That is a world where the USD has less cross-border trade to intermediate.

How Sico beat the 2025 TASI slump

Sico Capital’s regional funds had a standout 2025, successfully navigating a rare period of “decoupling” where the Saudi market underperformed its GCC peers for the first time in nearly a decade. While TASI faced a “warranted correction” in 2025 — dropping some 13% — Sico’s funds leveraged active stock picking and geographic diversification to deliver significant alpha for investors.

We sat down with Nishit Lakhotia, chief investment officer at Sico BSC; Shakeel Sarwar, head of asset management at Sico Bank; Hashem AlSada, head of asset management at Sico Capital; and Fatema Al Doseri, portfolio manager at Sico BSC, to discuss the year.

How we fared against regional counterparts: Most Gulf stock markets closed 2025 higher, led by Dubai (+17.2%) and Abu Dhabi (+6.1%), supported by strong fundamentals and corporate earnings. Qatar, Oman, Kuwait, and Bahrain also ended the year in the green. Further from home, Egypt outperformed the region, with its benchmark EGX30 up 40% last year.

We’re not used to this: “2025 was the first year after over a decade in which the Saudi market underperformed the other GCC markets,” Sarwar noted. “The Saudi market was one of the few markets in the world with negative returns.”

Sico’s Gulf Equity Fund delivered 15% gross returns, putting it among the region’s top performers for the year, driven by a strategic shift into non-Saudi markets. “The ex-Saudi space did exceptionally well, and our returns reflect that divergence,” Sarwar said. Lakhotia added that while Saudi equities lagged, other GCC markets offered stronger prospects, with growth in the UAE backed by real estate and financials, momentum in Kuwait’s mortgage market, improved liquidity in Oman, and Qatar’s LNG expansion.

Behind the TASI pullback

It was a necessary correction: The market slump reflected a “warranted correction” after stretched valuations, with the TASI entering 2025 trading at nearly 20x earnings — making it among the priciest across emerging markets, Sarwar said. According to AlSada, these elevated multiples drove a “rotation,” as asset managers locked in gains on overvalued names and redeployed capital across more attractive GCC prospects.

What dampened the market: Heavy concentration — around 60% — in financials and petrochemicals amplified the decline as banks faced liquidity pressures and net interest margin compression, while petrochemicals were hit by global oversupply and rising domestic fuel costs. Lakhotia added that the government’s reprioritization of major project spending — previously “steroids to the market” — further cooled investor sentiment. The pullback extended to high-growth sectors such as healthcare and consumer, where sharp de-ratings followed as lofty valuations met softer earnings and evolving regulations.

Navigating the correction

The Sico Kingdom Equity Fund outperformed the Saudi benchmark by 9% last year through replacing broad sector wagers with a disciplined, research-driven “stock-picking” strategy. AlSada explained that the fund maintained a bottom-up approach, targeting “banks that are going to benefit in an interest declining environment” and real estate firms resilient to recent regulatory shifts. By staying close to specific company convictions, the fund managed to hedge effectively against the broader market slump.

A conservative, capital-first approach: Al Doseri and Sarwar credited the fund’s resilience to a philosophy prioritizing capital protection over chasing lofty market highs. Staying underweight in expensive names like Acwa Power — which fell 50% during the year — and Aramco, the fund instead backed high-conviction prospects like ins. fintech aggregator Rasan, delivering strong performance. “We are not great when the markets are ecstatic […] but in difficult markets, we have time and again proved that we come out very strong,” Sarwar said.

Sico was also selective with its IPOs — subscribing to only one of several offerings that hit the market over the past year.

Catalysts on the horizon

Foreign ownership limit in focus: Despite lingering liquidity pressures, Lakhotia points to easing the foreign ownership limit as the most immediate catalyst, shifting the market away from strict QFI requirements and opening access to smaller global institutions to invest directly.

Sarwar frames the reform as a structural shift: While it may not drive immediate large-scale inflows, it should steadily improve liquidity by making it easier for a broader pool of investors to enter and exit the market. Sarwar cautions, however, that the move is “two-pronged” — reinforcing Saudi Arabia’s global investment appeal, but also increasing exposure to “hot money” and, in turn, market volatility.

Sico sees end of “irrational exuberance” for IPOs: The era of viewing every IPO as “free money” is over, said Lakhotia. After multiple listing failures in 2025 due to aggressive valuations, he stressed that success this year hinges on pricing pragmatism, noting that IPOs will perform if sellers are “willing to leave something on the table for investors.” Sarwar added that companies can no longer “throw an IPO at any price” and expect that demand will follow, as the market has realigned with broader fundamentals.

Kingdom Holding’s bottom line surges in 2025

Kingdom Holding saw its net income jump 73.3% y-o-y to SAR 2.1 bn in 2025, driven by higher dividend income, investment gains, and improved hotel revenues, it said in a disclosure to Tadawul (pdf). Meanwhile, revenue rose 12.6% y-o-y to SAR 2.7 bn, supported by stronger operating income and gains on investments at fair value.

Dividends: The company’s board recommended an SAR 1.04 bn dividend for 2025, at SAR 0.28 apiece, to be distributed quarterly in four equal installments, it said in a separate disclosure. The distribution date will be announced later.

Edtech Gaga bags USD 2.5 mn in pre-Series A round

Homegrown edtech startup Gaga secured USD 2.5 mn in a pre-Series A round led by Phoenix Venture Partners, with participation from family offices and individual investors, according to a press release. The funding brings its total to USD 4.2 mn.

Where will the money go? The funding will support the expansion of Gaga’s teacher network, enhancement of its technology stack, and scaling of Arabic-language educational content across the Kingdom. The company is also investing in AI-powered tools to personalize learning and improve student outcomes.

About Gaga: Founded in 2021 by Abdullah Al Khorasani (LinkedIn) and Eyad Alshabaan (LinkedIn), Gaga delivers live, interactive online education for students aged 4-18, offering over 1k programs across 200 subjects through real-time, gamified learning experiences.

The global economic growth outlook is darkening as the war drags on

Fitch Solutions’ BMI is now expecting the war to shave 0.2-0.3 percentage points off of global economic growth if the war lasts longer than four weeks and persists through April, which is longer than its initial baseline, it said in a recent note. This is due to the “direct impact of high energy prices on importing economies, as well as a hit to domestic consumption more generally amid rising inflationary pressures,” BMI explained.

Much of it boils down to oil and gas prices: Brent crude has hovered at USD 90-110 / bbl this month, but an extended conflict could push it to USD 110-130 / bbl in April or USD 150 / bbl in a worst-case scenario, according to BMI. Worst-case outcomes could add up to 0.7 percentage points to headline inflation for major economies in 2026, it said, with importers in Europe and Asia the hardest hit while exporters in North America could get a windfall. Higher oil prices would also push inflation in most countries beyond targets. If the conflict abates, we’re looking at prices normalizing closer to USD 70 / bbl later in the year.

Some of the damage is already done: “Even if the current conflict ends soon, inflation risks may remain high if expectations drift higher, while lingering security risks and global uncertainty could be a more persistent drag on activity,” it added.

It would take around a month for trade flows to normalize around the Strait of Hormuz, meaning that disruptions to LNG and oil shipments would continue through to 2Q 2026, which could have a severe impact on GCC economies.

Fiscal conditions would tighten around the world, as an uptick in interest rates and borrowing costs would weigh on investment growth and government spending plans. Currencies from energy-importing markets like Egypt and South Africa are also set to see declines against the greenback amid a more risk-averse backdrop.

The security and infrastructure risks are particularly stark for our region. A continued war would likely entail more damage to key energy infrastructure in the region, and ongoing attacks would keep much-needed, deep-pocketed tourists at bay. The hit to regional tourism would spill over into countries with remittance ties to the area.

MARKETS THIS MORNING-

Asia-Pacific markets are mixed in early trading this morning following contradicting updates on the regional war, with the Trump administration saying that talks with Iran are underway and Iran denying the news. In Japan, the Nikkei is basically unchanged, while South Korea’s Kospi is down over 2.7%.

TASI	11,080	+1.2% (YTD: +5.6%)
MSCI Tadawul 30	1,495	+1.0% (YTD: +7.7%)
NomuC	22,552	+0.3% (YTD: -3.2%)
USD : SAR (SAMA)	USD 3.75 Sell	USD 3.75 Buy
Interest rates	4.25% repo	3.75% reverse repo
EGX30	47,498	+1.2% (YTD: +13.6%)
ADX	9,778	+2.7% (YTD: -2.2%)
DFM	5,698	+5.2% (YTD: -5.8%)
S&P 500	6,592	+0.5% (YTD: -3.7%)
FTSE 100	10,107	+1.4% (YTD: +1.6%)
Euro Stoxx 50	5,649	+1.2% (YTD: -2.5%)
Brent crude	USD 103.39	+1.1%
Natural gas (Nymex)	USD 2.97	+0.6%
Gold	USD 4,534	-1.1%
BTC	USD 71,298	+1.1% (YTD: -18.6%)
Sukuk/bond market index	911.98	-0.1% (YTD: -0.8%)
S&P MENA Bond & Sukuk	148.73	+0.2% (YTD: -2.1%)
VIX (Volatility Index)	25.38	-5.8% (YTD: +69.8%)

THE CLOSING BELL: TADAWUL-

The TASI surged 1.2% yesterday on turnover of SAR 5.6 bn. The index is up 5.6% YTD.

In the green: Sidc (+8.2%), Rasan (+7.5%), and Cherry (+6.9%).

In the red: Yansab (-2.8%), Makkah Construction (-2.6%), and Saudi Ground Services (-1.7%).

THE CLOSING BELL: NOMU-

The NomuC inched up 0.3% yesterday on turnover of SAR 18.1 mn. The index is down 3.2% YTD.

In the green: Mulkia (+20.9%), Riyadh Steel (+15.1%), and Paper Home (+9.5%).

In the red: Twareat (-9.3%), Academy of Learning (-6.7%), and Digital Research (-4.7%).

CALENDAR

MARCH

25-27 March (Wednesday-Friday): Future Investment Initiative Institute, Faena Hotel, Miami Beach, US.

31 March (Tuesday): Zatca’s 23rd E-invoicing integration wave deadline.

APRIL

20-22 April (Monday-Wednesday): Sports Investment Forum (SIF), Riyadh.

28 April (Tuesday): GC Summit Saudi Arabia, Riyadh.

MAY

3-9 May (Sunday-Sunday): The Global Sustainability Expo, The Arena Riyadh Venue.

19-21 May (Tuesday-Thursday): The Saudi Entertainment and Amusement Expo, Riyadh Front Exhibition and Conference Center.

24-28 May (Sunday-Thursday): Eid Al Adha holiday.

JUNE

15-17 June (Monday-Wednesday): Aluminum Arabia, The Arena, Riyadh.

21-24 June (Sunday-Wednesday): Saudi Food Exhibition and Conference, Riyadh Front Expo.

21-24 June (Sunday-Wednesday): Saudi Print & Pack, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Riyadh International Industry Week, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Saudi Plastics & Petrochem, Riyadh International Convention & Exhibition Center.

21-24 June (Sunday-Wednesday): Saudi Smart Logistics, Riyadh International Convention & Exhibition Center.

22-24 June (Monday-Wednesday): The Future Hospitality Summit, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

JULY

6 July-23 August (Monday-Sunday): Esports World Cup, Riyadh.

AUGUST

31 August-3 Sep (Monday-Thursday): Leap Tech Conference, Riyadh Exhibition & Convention Center - Malham.

SEPTEMBER

9-10 September (Wednesday-Thursday): Procurement and Supply Chain Futures Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

9-10 September (Wednesday-Thursday): Real Estate Supply Chain Forum, Mandarin Oriental Al Faisaliah Hotel, Riyadh.

15-17 September (Tuesday-Thursday) The Global AI Summit, King Abdulaziz International Convention Center, Riyadh.

23 September (Wednesday): Saudi National Day.

OCTOBER

12-15 October (Monday-Thursday): World Energy Congress, Riyadh.

26-28 October (Monday-Wednesday): ACHEMA Middle East, Riyadh International Convention & Exhibition Center.

NOVEMBER

24-28 November (Tuesday-Saturday): Aero Middle East and Sand & Fun, Thumamah Airport, Riyadh.

Signposted to happen sometime in 2026:

2H: Sabic’s USD 6.4 bn Fujian project in China to start production;
September: Saudi Paper and Packaging Expo, Riyadh International Convention & Exhibition Center;
November: The UN Trade and Development Global Supply Chain Forum to take place in Saudi Arabia;
November: The Esports Nations Cup, Riyadh;
The World Economic Forum’s Global Collaboration and Growth Meeting, Jeddah;
SkyMove Air Cargo MENA, Riyadh;
The Intervision international music competition will take place in Saudi Arabia.

Signposted to happen sometime in 2027:

The World Water Forum takes place in Riyadh;
The Ocean Race finishes in Amaala on the Red Sea;
Riyadh-Kudmi transmission line to be completed.

Signposted to happen sometime in 2Q 2027:

The Hail Region Water Networks Project is expected to be completed.

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Major players are still chasing the June IPO window