Tracy Aloway: Hello and welcome to another episode of the Odd Thoughts podcast. I'm Tracy Aloway.

Joe Weisenthal: and I'm Joe Weisenthal.

Tracy Aloway: Joe, it is currently April 10th.

Joe Weisenthal: That's right.

Tracy Aloway: It's a Friday. It's a beautiful Friday outside. We always say when we're recording things nowadays because we never know what's going to change in the next hour or day or week, but at the moment there is some sort of ceasefire.

Joe Weisenthal: Yes.

Tracy Aloway: Between the US and Iran, Israel is rather more uncertain at the moment. But it seems that whatever happens in the short term with this particular conflict that the region, the Gulf region and the Middle East has already been vastly vastly changed. Yeah, it seems almost certain of that in many different dimensions. I mean, look, you know, first of all, there's just been the literal physical damage. You can have a ceasefire, but there's going to be energy and time to get expended, etc. Then of course and we already have done an episode for example about Dubai real estate in particular or Dubai in particular and the question of like here's this country that was perceived really by people around the world as maybe one of the most stable places that you could live and obviously some of that is being called into question but then like you know here is just a it's just a a gigantic war and wars even short ones potentially have all kinds of ripple effects and scars and so forth. Earth and it'll change obviously the course of the region.

Joe Weisenthal: Yeah. The way I think about it is the Gulf region was sort of a center of let's say three things. So energy,

Tracy Aloway: oil and resulting prochemicals which we've talked a lot about.

Joe Weisenthal: Capital there's a lot of money emanating from the region because of its oil wealth and that flows into all sorts of things from you know US tech stocks to infrastructure investments and all of that. And then thirdly it's well I guess I could add trade. It's a purveyor of trade routes for sure, but setting that aside. Thirdly, it's also a capital of living standards and this idea of we're going to build a diversified Gulf city state where people can come and live. and we sort of talked about on the Dubai episode, but today we're going to be talking about maybe all three or four of those things and what this particular conflict actually means for them for a region that has really built itself around this idea of energy, capital, living standards and trade. And then the one thing I would just point out is that obviously the region has almost a reputation for being in some version of constant war or there is constant tension etc. Right? So at various time do you disagree?

Tracy Aloway: I mean the Iran threat has always been there but one of the key themes of the UAE for instance becoming this haven of stability was that it wasn't expected to erupt in this way.

Joe Weisenthal: That is indisputable and that is part of why it's so shocking. But you know tensions in the Middle East on some level is almost like a cliche in the news etc. And so the you know over years we're in multiple Gulf Wars etc. the war in Gaza that's been taking place over the last multiple years. I mean there just extraordinary just a long history of uh conflict.

Tracy Aloway: Yes. So we are going to be talking about how the latest conflict is going to impact the region potentially forever. So, we have the perfect guest. I'm very happy to say uh we are going to be speaking with the chief emerging markets economist over at Bloomberg Economics, Zia Dahoud. Someone we've spoken to before. Uh I think our last episode with with him was about Egypt, but someone I used to speak to a lot more when I was actually based in Abu Dhabi and he was based in Dubai. He's about to go back to Dubai after uh being in London for the past few weeks. So Zad, thank you so much for coming back on our thoughts.

Ziad Dahoud: Thank you for having me, Joan Tracy.

Tracy Aloway: So out of curiosity, what have the past few weeks been like for you as someone who is not, you know, not just living and breathing Gulf economics, but also physically living in the region for the past few years.

Ziad Dahoud: It's been intense because although we've been expecting the war to take place, the intensity of it, the reaction and feeling it rather than expecting it and living through it rather than expecting it has been yeah unprecedented I think for the region. But yeah, it was expected but it was still different when you feel it than than we when you just anticipate it.

Joe Weisenthal: When you say it was expected, do you mean it was expected in the sense that by early February that okay, you know, clearly the rhetoric and the actions and ship movements, etc. pointing to possible war or was it something deeper longstanding where there was this tension that was eventually perhaps going to come to a boil or come to a head in some manner or another?

Ziad Dahoud: I think for us, and we've done this in writing, and I've done that mostly with my colleague Dina Fandeari, is that since the last war in June, the 12-day war, it felt like there was unfinished business and there'll be a second round of this war. So, we've written multiple pieces saying this is not over. There'll be another round of escalation. And towards the beginning of the year, as you had more US mobilization, as you had more threats from President Trump, it became increasingly likely that a war was going to take place. I personally cancelled some trips because I was I thought the war would erupt while I'm abroad and I didn't want to be stuck abroad. And we also thought it was going to start on a weekend. Actually, we thought it was going to start either on a Friday or a Saturday. So, I think from January onwards, every Friday at the office, we would ask for expectations. who thinks that there will be a a war uh this coming weekend and sure enough it did erupt on February 28th. So yeah, in some sense it was expected. I was on alert every weekend waiting for something to happen.

Tracy Aloway: One thing that I think was more unexpected was the retaliation by Iran on places like the UAE. And I think it's probably fair to say that if if you were a leader in the UAE or Saudi Arabia for that matter who had invested heavily in Trump in various ways politically, this was maybe not what you were expecting to be dragged into this particular conflict and see some of your infrastructure directly hit. What's the mood like for UAE and Saudi leaders at the moment?

Ziad Dahoud: For them, I think it's probably their worst nightmare. In some sense, it's it's an outcome they had tried and lobbyed to avoid for a long time. Let's remember that just during this Trump's term of presidency, which started in January 2025, the Gulf leaders hosted Trump on his first planned foreign trip if you exclude the trip to the Vatican when the pope died. OPEC plus which is led by Saudi Arabia and it has number of Gulf countries as important producers started raising oil output in April shortly after Trump's inauguration by amounts that are far bigger than markets were expecting and that's that came after months of delay and we were among other people were asking why why did they do this against probably their economic interests and one potential hypothesis is that they were trying to please Trump because he liked lower oil prices. So they hosted him on his first trip. They gave him, you know, they injected a lot more barrels of oil into the market to lower oil prices potentially against some of their economic interest. They pledged trillions and trillions of dollars of investments and deals in the US. So they gave all of this and I think they wanted one thing which is basically no regional war because they thought they'd be caught in the crossfire. And what did they get? Trump visited the Gulf, three Gulf states in May 2025. He visited the UAE. He visited Saudi Arabia and he visited Qar. A month later, a war erupted between Israel and Iran which the US intervened in. Four months later, Israel bombed Dha andQatar where Trump was in May. And about a year, less than a year later, in fact, we have a regional war in these in which these countries are in the crossfires. So, I think it's an outcome that they tried hard to avoid. But for Trump, when it became a choice between what the Gulf wanted and what Israel wanted, Trump had a clear basically choice which he chose Israel over the Gulf. One of the things you hear about or people talk about is okay, the US is an important security partner for the region. It provides a quote security umbrella etc. What does it mean to be an important security partner if infrastructure was in fact hit? Not all of it was able to stop. The US was not able or has not been able to open the straight of Hormuz unilaterally and actually at the moment Iran clearly controls it. Does this fundamental premise like setting aside how people feel if the US does not have the capability the missiles the missile defense etc to actually keep secure the infrastructure to keep the straight of Hormuz open does it change the discussion or the thinking of what a security relationship even means I think it does but there are two dimensions to this there's a dimension where you have the military equipment and there's a dimension where you have sort of the political will and the strategic side of it. In terms of military equipment, I think US military equipment might have proven their worth.

Tracy Aloway: Okay.

Ziad Dahoud: A lot of drones, a lot of missiles were thrown at the Gulf and very few percentage of this has filtered through.

Tracy Aloway: Okay.

Ziad Dahoud: Yes, some have, but it could have been a lot worse. And the reason why it wasn't a lot worse is because they were using state-of-the-art US military equipment, which has proven their worth. So, I don't think that will stop. Actually interestingly if you look at the Gulf trade relations there was a big change. So the US used to be an important trade partner then China took over around 2010 and now trade with China is at least three times as big as trade with the US except in one area where defense the US completely dominates.

Ziad Dahoud: So that's that side and I don't think that will change. And then there is the political and sort of the strategic side. This is not the first time that the US security umbrella disappoints the Gulf. This is one episode out of several. There's this current one which is probably the biggest. There was an episode in 2017 when Qatar faced a blockade from its neighbors and didn't get the US protection that it wanted. You know, in 2018 and 19 there were attacks on energy facilities in the Gulf, both in the Persian Gulf, but as well as the attack on Aramco in 2019. and the US was nowhere to be seen. So I think the security umbrella, the political umbrella for the US security is definitely there is a challenge there and it hasn't delivered on certain important points of time. But when it comes to the military equipment, I think that that has proven its worth.

Tracy Aloway: Can we talk about intragulf relationships for a second because it's it's hard to keep up. From what I remember, the blockade of Qatar was the big story when I was in the region in like 2017. And since then, it seems like Qatar kind of made up with Saudi and the UAE, but there are still some tensions. Meanwhile, Saudi Arabia and the UAE are still maybe best described as fremies at this point. I don't know what's the current status of those relationships and does the conflict in Iran maybe start to bring some of those regional superpowers closer together.

Ziad Dahoud: Right. So the big story in the Gulf and in terms of intragulf relations uh before February 28th was there was a big Saudi and the and UAE rift. It was visible. It was out in the open. It reminded a lot of people of the rift with Qatar in 2017. although I didn't think it would escalate to that level and the points of disagreement where basically the two policies two contradictory policies on Yemen on Libya and on Sudan. I think if you think about the Gulf, there are so many common things in the Gulf. You know, they share they're almost the same ethnicity, same language, same religion, same coastline, same geography, even at times same same external threats. But there are also points of disagreement. I think if you think about the economics, all of these countries are trying to diversify away from oil and there sort of sometimes they overlap on the same sectors. At times they have different visions for how to manage the oil wealth which is important and that sometimes shows up in OPEC plus meetings. And on the security and national security and geopolitics there is disagreement about the role of political Islam in the region. There are disagreements on how to deal with the other regional powers Turkey, Iran and Israel. And there are different visions for what to do with the wider region with Yemen, with Sudan, with Libya and even Egypt and the Horn of Africa. So the current state is is basically these countries have different visions and different paths and I think even after this conflict there'll be different visions on how to deal with the US. The question that Joe asked you know there is a disappointment in the US. What do we do? I think some countries like the UAE would double down on its relationship with the US and possibly Israel. I think a country like Katar would stick to the US but tries to create a rift between the US and Israel while it has an alliance with Turkey. I think if you're Saudi Arabia, what the US wanted from you is money, is deals, but also a normalization with Israel because every US president thinks that they can get the Nobel Peace Prize if they deliver that. That looks distant now in the context of the current war and Saudi has to choose where it aligns itself relative to the others. Oman is a completely neutral country that is talking to everyone and quietly doing things its own way. And Bahrain is again somewhere in between. So I think we used to think about the Gulf as one entity. this these six countries that are all monarchies that are all oil and gas producers um that have the same foreign relations or sort of foreign for foreign um relation strategy and it's it's it's actually very different now there at least three or four sides to it

Joe Weisenthal: the other point of contention that I think was sort of like coming to the four although it was never as explicit as some of the foreign policy stuff was it felt like everyone was trying to do the same thing economically at the same time which was diversify the economy. So, not just have oil, but also build up prochemicals, build up tourism, build up the technology centers, everyone's going to be, you know, like a big data center play. And the question in my mind was always like, well, can everyone be doing this at exactly the same time?

Ziad Dahoud: That's that's a great question, Tracy. And and possibly the likely answer is no. And you're right. So, they face the common question, which is basically their economies are extremely dependent on oil and gas. If you look at the exports, if you look at government revenues, they're dominated by oil and gas. They knew they needed to diversify away from this. They needed to diversify away from this because oil prices were volatile. Because if oil prices drop by 50%, you can't have your incomes drop by 50% without adjusting your spending, which is usually painful. So, it's good to diversify. So, what they did is they went to consultants and asked them, you know, what sectors should we target? And they got the same answer. You should move to petrochemicals. You can move up the hydrocarbon value chain. You should be a financial center, a tourism hub, a logistical hub, and now it's called AI. It used to be called knowledge based economy and big data. Something was crypto for a while too.

Ziad Dahoud: Yeah. The problem with this is you're talking about small geography and the same time zone almost. So, do you really need multiple mega airports or multiple global airlines? Probably not. Do you need multiple mega ports? Probably not. You probably need one or two. Do you need multiple financial centers? There's a financial center in Dubai, another one in Abu Dhabi, an old one in Manama and Bahrain. Qatar has one. Saudi has one. Probably not. You probably just need one. So, you have this sort of crowding out. Again, tourism. Yes, like in January and December, it's beautiful over there. The weather is great when the rest of the world is dark, cold, and rainy. But probably people are not going to come and spend, you know, 6 weeks instead of 10 days there. they're going to split that 10 days between different countries. So that creates a form of cannibalization and competition and that adds to basically the intra sort of GCC competition which comes to the surface at times.

Joe Weisenthal: Tracy, do you know the name of Qatar's first uh LG carrier?

Tracy Aloway: I have no idea. What is it?

Joe Weisenthal: It's a very random trivia question I came across the other day. Do you know?

Tracy Aloway: No, I don't. Joe. Their first LG carrier is the ship the Rex Tillerson because he w got involved to end that blockade you talk about the 2017 one. So he was the one that sort of crafted the diplomatic solution. So it was an honor to him their first LG carrier there.

Ziad Dahoud: That's amazing.

Joe Weisenthal: Yeah, it's uh it's right now.

Ziad Dahoud: But would it be the case that Rex Telison used to be the CEO of Exon Mobile? Exon Mobile was one of the one of the early companies that went into the LNG industry.

Joe Weisenthal: There you go. So they'll call That's right. So like he you know he's like a patron saint of the country basically and so he got they named the ship after him. Something I'm curious about is, you know, you mentioned in your first answer this disappointment nightmare scenario because ultimately Trump despite the visits and all this stuff like went to war with Iran at least it shows the security preferences of Israel is maybe perhaps a neutral way to put it or something like that that he prioritized Israel's security interests over the rest of the region. What I'm curious about is like, okay, so the regional players, they're very disappointed with that, but they're probably going to grit their teeth, etc., and they'll continue to, you know, you mentioned UAE may double down on its US relationship, grit their teeth, continue. Does that create problems though domestically and even beyond just this war, obviously the war in Gaza, etc. Does that create domestic stability problems for these countries just in terms of like why aren't our governments taking a more confrontational stance on this entire issue?

Ziad Dahoud: I think there's a few things here. I think the first thing is is you're right to point out the flare up in the Middle East did not start on February 28th, 2026. The Middle East has been enormous constant state of war at least since October 2023. It's just we're feeling it more in the global economy because you have the closure of the Straight of Hormus and because energy facilities in the Gulf are being hit. Energy is being weaponized now unlike the what was happening before February 28th.

Ziad Dahoud: I think you're also right that what happened in Gaza has definitely led to a level of anger and fury in the Arab world that's probably unprecedented. And we've reported in this, my colleagues Sand Dagger and others have written about this for Bloomberg. I think the Gulf though is sort of different to other states. And the unique thing about the Gulf from the rest of the Middle East, which is why they were insulated from the volatility in the region is that for the most part, maybe with the exception of Saudi Arabia, these are small countries with small populations.

Tracy Aloway: Yeah.

Ziad Dahoud: And if you have that, then that can lubricate a lot of things and that can calm a lot of things down.

Joe Weisenthal: That's a very different condition than say Jordan, right, which is

Ziad Dahoud: Egypt or or other places. Yes, that that's exactly right. That's the unique thing about about the Gulf

Ziad Dahoud: is the level of wealth. And I think that's another motivation for why they want to diversify away from oil. If in the future because oil again has not just created an economy and petro dollars and sovereign wealth funds and reinvestments into the global economy. It has created a political economy, a social contract and a political system and a political system that remains calm and stable in the face of a volatile region. And what you want to do is to make sure that you maintain that calm. You have a source of income that maintains that calm and that cohesiveness when oil becomes worth less in the future versus now. And this is why you have this big push towards diversification. But I think the fact yeah the level of wealth versus the size of the population creates different dynamics and tradeoffs versus other bigger countries in the region.

Tracy Aloway: Wait, can we go back to the Rex Tillerson ship for a second? Because this is actually a serious question, but Qatar famously doesn't actually pipe anything through the ground. It sends all of its gas out on ships because it distrusts its only land border, which is with Saudi Arabia. When we're talking about physical changes to the Middle East and maybe physical changes in the way that oil actually flows out of the region, could we see a situation where Qatar starts to actually pipe stuff through the ground instead of just ship it out?

Ziad Dahoud: I mean this war has exposed something a couple of things that are very important. First that the Middle East despite the rise of renewables, despite the rise of shale oil in the US, despite the rise of alternative sources of energy, the Middle East is still super important for global energy supplies. And the second thing, most of the energy that comes from the DE goes through this small choke point that's called the straight of Hormus which exposes the world because it can cut supply but also it's important for these countries to get their their oil out and get and gas out and get their their money in so they can you know sustain their economies and investments and so on.

Ziad Dahoud: Now I think this war has taught it taught us a third thing. If you have a route out of the straight of Hormuz, you're probably insulated and you are in better position than otherwise.

Joe Weisenthal: A route besides the straight of Hormuz, right? Not

Ziad Dahoud: or an alternative.

Joe Weisenthal: Yeah. Okay.

Ziad Dahoud: Yeah. So, I think for example, I think now Saudi Arabia is probably making more money out of all exports compared to the pre-war period simply because they have that pipeline that goes from the east of the country to the Red Sea. If you think about it, just just simple maths, you know, Saudi Arabia exports 30% less now, but oil prices are up by a lot more. So, if you take sort of that back of the envelope calculation, that tells you Saudi probably making more income out of it all exports despite what is going on in the region. Obviously, like there are threats that these these the this pipeline could be attacked and the port in the Red Sea could be attacked, but as things stand, it's probably making more money now than it did before the war. So if you're Saudi, if you're the UAEA and you have these alternative routes to Hermuz, it's probably one of the better investments that you've made over the past few decades and it's paying off now. You know, geography is kind to you because you can do this unilaterally. You can just have a pipeline from Abu Dhabi to Fijera. You don't need to go through other countries. You can have a pipeline from the east Saudi Arabia to the west of Saudi Arabia. It doesn't have to go through other countries. Other nations don't have that sort of geographical dividend. If you're Kuwait, if you're Bahrain, if you're Katar, you have to do it through other countries. Has only one land border, which is Saudi Arabia. So if they want to have an alternative to having LNG tanker or other tankers, then have to do a pipeline. And the pipeline will probably go through Saudi Arabia. I'm not an expert enough. I don't know if they could go an underground pipeline to Iran or all the way, I don't know, to Kuwait via Iraq. But I think the most feasible thing is via Saudi Arabia. Is that going to happen? I don't know. Let's see. I don't know. I'm 50/50 on that. H

Joe Weisenthal: globalization is so beautiful because I'm just sorry I'm reading about the Rex Tillerson more. So, first of all, it's the first conventional size LNG carrier. The first sort of model that the country had. The naming ceremony though was held at the Hudong Jong Wa shipyard in China, which of course is where it was built. It's just so beautiful. I

Tracy Aloway: was Rex Tillerson there.

Joe Weisenthal: I I don't know. I hope I hope he got like smash the glass or you going to smash the champagne glass.

Tracy Aloway: Is that still an active tanker or or is it

Joe Weisenthal: Yeah. Yeah. Yeah, it is. Cuz I'm looking at marinetra.com. It's in the kind of near the Gulf of Mexico right now. It looks like. I don't know what it's doing there, but yeah, maybe it's leaving the port of Houston or something like that.

Ziad Dahoud: Better than being stuck in the Gulf.

Joe Weisenthal: Yeah. Yeah.

Ziad Dahoud: It's not stuck. Actually, that was one of the interesting things that uh we talked about in our episode with Bob Brackett, which is that actually a lot of the Qatar's uh LNG revenue right now is from exports from the port of Houston because it was involved in the investment there etc.

Joe Weisenthal: Let's talk about so we mentioned one of the topics that we've discussed is just like the phenomenon the global phenomenon known as Dubai.

Tracy Aloway: Oh, right.

Joe Weisenthal: Oh, I'm so sorry. I'm I'm googling the Rex Tillerson.

Tracy Aloway: All right, go on. We can keep talking.

Joe Weisenthal: And I just learned I just learned that Rex Tillerson is not the only American official to have an energy carrier named after them. Um, guess what the other one is?

Tracy Aloway: Okay. Chevron once named an oil tanker, the Condisa Rice.

Joe Weisenthal: That's great. I love that.

Joe Weisenthal: But, uh, let's talk about the phenomenon known as Dubai. and all around the world. If you're an influencer and you're good-looking and you like to post selfies or you made a bunch of money in crypto and you don't really have anything to do, it's like okay, like I know there's more to the Dubai economy than that. I'm being a little bit facicious, etc. But does this change the trajectory at all or from your view given you know the relative I don't know that basically the trends of people who are looking for a very stable place with low taxes and wonderful weather etc. Will they will that trend continue in the same way that it had been?

Ziad Dahoud: So let me just tell you something about the Dubai attractiveness. Yeah. Every time I came to London and obviously our Bloomberg office is in the city and I saw old friends seriously every time people ask me how can we move to the Middle East and how can we move to Dubai and these are people have no links to the Middle East.

Tracy Aloway: It's incredible

Ziad Dahoud: I think it's an and let me just give you another example actually in late 2024 I took soatical from Bloomberg and I was I was teaching at Harvard and 20% of my office hour was people asking me how to get jobs in the Middle East.

Tracy Aloway: That's incredible. Wait, were these Americans asking you?

Ziad Dahoud: Uh mixed. Yeah. But so it's not just influencers and pretty people. It's like a lot of brainy people also wanted to move there.

Joe Weisenthal: I feel like for as much as we know about all everyone who has moved to Dubai the big like it actually remains perhaps an even under reportported story the sort of like exit loyalty and voice the exit part people wanting to get out of what they see as crumbling high tax unsafe western world where democracy and

Ziad Dahoud: yeah I think what it offers you and this is why so so I think there's two sides to this. I think there are people who live there. I haven't heard a single person saying, "I want to move out of Dubai permanently as a result of this war."

Tracy Aloway: Okay.

Ziad Dahoud: Some people have relocated temporarily. I think some people on the margin might decide to leave, but I haven't heard that yet. And I think what it offers you is obviously like incredible safety. It's well connected. The weather is good six months of the year. And obviously for a lot of people taxes is is just like zero taxes is is appealing. And if you're on the right, I wouldn't say right extreme of the income distribution, but if you're on the right of the right half of the income distribution,

Ziad Dahoud: it's actually a nice life.

Ziad Dahoud: So I think people who live there, I think they're going to prove to be stickier than we think. Yeah,

Ziad Dahoud: I think where there will be probably challenge is that the questions I've been getting about can you know how can I move to Dubai and how can I get there? They might become fewer as this war develops and it depends on how long this this war I I think there something else that happened in Dubai why its attractiveness increased after the pandemic is that you have the network effect people have the friends moved to to Dubai.

Tracy Aloway: Sure. Yeah. They thought, "Oh, you know what? The weather is good. Taxes are really, really zero and you know, life is nice and you get all the support that's on the extra and things are convenient." And then people had like, you know, a network of friends that already that are already there and they're willing to move there and and live there.

Ziad Dahoud: So, I think that's that's the element of it. I think Yeah. So, I think in terms of the the long-term aspect of it, I think people who live there are probably going to prove stickier than we than we think. the attraction of new people is probably gonna ease on the margin but again there was a a whole long queue of people who wanted to move there and probably

Ziad Dahoud: yeah that might that might slow a bit but but probably not significant I think the other thing with Dubai is I know this war is different because it's hitting it directly but it did benefit from previous wars money did tend to move to Dubai as a result of conflicts whether it's in the Middle East or even in the case for example of Russia Ukraine where we saw a lot of money going into Dubai. We saw the pandemic was beneficial to Dubai. A lot of Brits moved to Dubai as a result of that

Ziad Dahoud: and you know that's one of the reasons why the real estate market has taken off since 2020.

Joe Weisenthal: Just one related question on this. How can I move to Dubai?

Ziad Dahoud: Uh ask Tracy. She was there for a few years.

Joe Weisenthal: What do I have to what do I have to what is what are No, but for real. What are the basic

Tracy Aloway: First of all, you'll still be paying taxes, Joe, as an American citizen.

Joe Weisenthal: Yeah. Right. So that's not

Tracy Aloway: forget about that. Can we do like local economics in Dubai for a second? Because if I go on some of the message boards and again I think like one important thing to recognize here is that social media in the UAE it can be fairly controlled. I see a lot of posts right now about like I just lost my job. I need to leave the country. I'm taking out a new credit card in order to buy my flight out of Dubai, which might be a little bit extreme. But just from an economic perspective, like how many jobs do we expect to be available locally in Dubai given some of the pressures that we're seeing?

Ziad Dahoud: On your questions, Tracy, I think it depends on the duration of war. If the war ends tomorrow or if even it continues at a lower intensity where you have some you know ships going through the straight of Hormuz where the attacks on Dubai ease a bit and the UAE in general and the Gulf in general that is very different world from if the world continues until I don't know June or July or August for 6 months. So I think the economic impact depends on the duration of war and that is a big uncertain aspect. On your question Joe who's moving to Dubai a lot of hedge funds and asset managers are actually moving to the UAE a lot. So you know the people that move are there and then you have the sort of the supporting environment that supports these these companies.

Ziad Dahoud: Yeah. every every company that where we are in Dubai for example we're in the Dubai International Financial Center and that has grown significantly since the pandemic they they're doing a new expansion and offices are full and we've even our Bloomberg office we expanded into a new floor in Dubai

Tracy Aloway: actually um that reminds me since we're talking about the DIC you know I mentioned in the intro there is this huge capital component in the Gulf region there's a lot of money there and it tends to flow outward into other things talk to us about how you anticipate changes is to some of those capital flows as perhaps some of the oil money is reduced. Although I take your point that Saudi Arabia might be making more than ever, would you still expect that outward flow or would you maybe expect some of the Gulf countries to have to start directing it more inward to maybe rebuild the infrastructure that they've lost?

Ziad Dahoud: So, a few things. I think society is not making more money than ever. It's just making more money than when oil was at $65 per barrel.

Joe Weisenthal: Sure. Sure. Oh, yes. Of course. Yes.

Ziad Dahoud: Yeah. in terms of the direction of capital and you're right. I think the way I think about the Gulf is that the Gulf gives the supplies the world with three inputs. It supplies it with energy. It supplies it with capital and supplies it with trade routes and all three are being hit by the current war. And it gets from the world three prices. It gets the price of interest rates because they have peexs to the dollar. It gets the price of the dollar exchange rate and it gets the price of oil. It doesn't determine the price of oil that comes from the global economy. In terms of direction of capital, I think the answer for me is fairly clear. The direction is going to go down and it's going to go down because you having the interruptions to oil exports because that source of capital is that you export oil and gas, you get the income, you spend some of it domestically and then the surplus you invest abroad. I think the second thing the defense spending will go up. one because they need to replenish on the defense systems that they've been using over the past 6 weeks and second because they've realizing that the world is a far more dangerous place than it was 6 weeks ago. Iran is more dangerous. Israel is more expansionist and then you have these, you know, non-state actors, Iraqi militant groups, Houthis in Yemen. I think this conflict would probably create new groups that we haven't heard about before and they are a threat. So I think they'll be spending more in defense and that if you spend more on defense and if your income is lower that necessarily means that what you send to the world in terms of capital exports will come down and that is important that is important not just for you know English football clubs and and I don't know real estate in in London or in Egypt or Turkish bank deposits or tech companies. You guys hosted um my colleagues Tom Olik and Jamie Rush on the book that that Bloomberg economics wrote on the price of money.

Ziad Dahoud: Yeah, we had a chapter on that on petro dollars and how petro dollars actually suppressed long-term interest rates in the US. Okay, it was 25 basis points, but given the size of the US economy and the size of his debt, that's still tens of billions of dollars every year. if there's less flow into there that that will affect not just these smaller markets but also the deepest market in the world which is the you know the US treasuries. So you mentioned something there that I thought was important, you know, okay, one effect is going to be likely, an increase in military spending for obvious reasons. Setting aside the fact that we don't know how or when this war is going to end, that's something we haven't really talked about yet, but setting aside that we don't know how this is going to end. It may emerge and it right now many people probably say this is likely that at the end of this war, our estimation of Iran as a major power will have increased. It may be a toll collector for the strait of Hormuz going forward. It is established that the government is actually quite strong. several months ago. Maybe people thought it was teetering on the edge. It it may turn out that actually this strengthens the IRGC and the stability of the existing regime. It's established that it has a military that can to some extent withstand the full might or at least the partial might of the United States. How does that change the region that okay everyone's view of Iran as a sovereign security state has to rise or seems very likely to rise as a result of this war.

Ziad Dahoud: I think there's a couple of things to mention here. First thing is as far as Iran is concerned I think this last past six weeks have have taught us something and I keep saying you know things taught us something but we keep learning from the what is happening now and that's basically if you have clear and achievable goals you can punch above your weight. Iran had just basically two simple goals because they they were completely cornered which is basically survival of the system and deterrence so that they don't get attacked again in a few months and they thought they could achieve this. So it's very very clear goals very existential they thought they could they could achieve this by imposing costs on their neighbors by hitting the Gulf on the global economy by hitting the Gulf and closing the straight of hormones and hitting energy facilities.

Ziad Dahoud: Israel had a clear goal, but it probably wasn't achievable, which is regime change in Iran. And the US, it's just confusing what they're doing in in in terms of this war. Like there's no clear well articulated goal for this current war. And I think that's why Iran is punching above its weight.

Ziad Dahoud: What does that mean? I don't know if it's going to you know Iran is going to emerge as a power but given that you know that it's punching above its weight given that it's controlling the strait of Hormuz given that it actually has discovered that the way to pressure the US and Israel is by imposing cost on the global economy via attacking the Gulf. That's not a safe world that the Gulf want to be in. And I think for the Gulf, they're thinking now about, you know, given that that because even if this current system in Iran does not survive and we have a new system, you know, they've learned the same lesson, which is basically if you get attacked, if you're cornered, this is how you get out of it by closing the straight of Hormos and by attacking the Gulf. For the Gulf, that's a challenge and that's a challenge that they need to address and think about because they haven't faced that sort of threat before.

Tracy Aloway: Can I ask one more question which is you mentioned the expansion of the Dubai Financial Center DIC 2.0 and I'm looking at some of the mockups for it. It's supposed to be completed in 2040 but all of the mockups very beautiful lots of shiny glass buildings. And when I'm thinking about potential changes from the Iran war, one very visible one would be, well, maybe maybe there aren't as many very tall glass buildings in places like Dubai that can end up getting damaged by drones like would you expect an actual physical change to the city's architecture as a result of this?

Ziad Dahoud: So this is where I think also the war would hit like unexpected corners beyond you know defense and relationship with the US and the straight of hormos. It's also architecture. You know, there's a lot of um building that's taking place in all these cities in the Gulf are are growing. The problem is that when you were in Dubai, you know, living on the 20th floor and you get the alert saying uh you know, it's under attack. Stay away. Don't go out and stay away from windows, you know, your your place is is is uh floor to ceiling of windows.

Tracy Aloway: No windows.

Ziad Dahoud: Hey, you have to go down into the car park where there's no air conditioning.

Tracy Aloway: Some people did. Some people did. And it's also I don't know if it's safe to be next to cars.

Ziad Dahoud: Oh, yeah. or inside cars. So they might be rethinking about this. They might be rethinking, you know, this is this is what wars do. They change a lot of things and a lot of perspectives on things and and that goes into corners that we didn't think about before, including architecture. I always think the example of of Kuwait is a clear one. Kuwait in 1990 or before 1990 relative to its neighbors, it was fairly advanced. you know, it had culture. It was an open society. It had a a participatory political system at times a parliament that was uh quite loud and vocal. Infrastructure was was modern and all of a sudden Iraqi tanks roll in. There's an Iraqi invasion of Kuwait in 1990 and things changed in Kuwait and the big thing that happened there is that they started investing less at home and sending most of their wealth abroad and over decades that means deteriorated infrastructure. If you think about Kuwait, there's a couple of news items recently that Kuwait might have power cuts, which for an oil powerhouse, one of the most richest countries in the region, in one of the hottest countries in the world, to have power cuts is strange, but you can trace what is happening there in terms of the electricity shortages in Kuwait in 2026 to an event that happened in 1990.

Joe Weisenthal: Wow. So yeah, it it will yeah it may not be the same lesson everywhere else, but I think the lessons will be deep and broad and they'll go to unexpected corners including architecture trees.

Tracy Aloway: All right, Dia Daw, thank you so much for coming back on all thoughts. Truly the perfect guest to walk us through all of this. Really appreciate it.

Ziad Dahoud: Thank you for having me.

Tracy Aloway: Joe, that was a great conversation with Chad as always. Truly um the perfect guest.

Joe Weisenthal: There's so many things that stuck out at me, but I think his last comment about how war, you know, kind of unfolds and changes things in unexpected ways

Joe Weisenthal: was very interesting. And the Kuwait example he cited was very compelling.

Tracy Aloway: No, that's fascinating. I would have had no idea. And I'm reading this right now. Kuwait here is this energy powerhouse and Kuwait schedules electricity cuts to do maintenance and that the lack of maintenance that had happened due to domestic infrastructure can be traced to fiscal priorities in the wake of a war that happened over 35 years ago. It's really wow. Yeah. I mean like yeah I wouldn't have thought about that but it's obvious. And so this is going to reshape the region obviously in ways we can't anticipate. I thought it was very ominous that when he was talking about various non-state actors, he mentioned, including non-state actors we've never heard of that will now get stronger or that will emerge out of this. So again, even if you know, we look at our screens and the markets back and maybe hopefully, you know, maybe the ceasefire will hold longer or the will the ceasefire will turn into the end of the war, etc. Seems obvious there's going to be major ramifications.

Joe Weisenthal: Yeah. The other thing that stood out to me was the short comment about petro dollars, which is really what we mean when we're talking about capital emanating from the Gulf.

Tracy Aloway: And I think like to some extent that hasn't really been appreciated yet. If you think that these Gulf economies are maybe going to have to rebuild infrastructure um that was damaged. If you think they're going to have to build new infrastructure as a result of nervousness around what happens with the straight of Hormuz in the future. If you think that maybe they have to do stimulus for their local economies because of job losses, it just feels like there's going to be potentially a lot less money circulating in the global economy.

Joe Weisenthal: Yeah. And then another way to think about it too is that we're already in a period of resource constraints. And so just like the rebuilding of various infrastructure in fact and I don't know that you know one of the facilities that was hit I think there was a basic issue which is that they need natural gas turbines and we know that natural gas turbines are among the scarcest thing in the world right now due to the AI data center buildout. And so here you have even further strain and demand being placed on the sort of physical building blocks of the modern world at a time when they were already very tight.

Tracy Aloway: Yeah. It feels very inflationary.

Joe Weisenthal: Yeah. Yeah. Exactly.

Tracy Aloway: All right. Shall we leave it there?

Joe Weisenthal: Let's leave it there.

Tracy Aloway: This has been another episode of the Odd Thoughts podcast. I'm Tracy Aloway. You can follow me at Tracy Aloway.

Joe Weisenthal: And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our guest Zead Dude. He's zeadm dude. Follow our producers Carmen Rodriguez at Carmen Arman Bennett at Dashbot and Kalebrooks at Kalebrooks. And for more OddLots content, go to bloomberg.com/odlots with the daily newsletter and all of our episodes. And you can chat about all of these topics 247 in our Discord, discord.gg/odlots.

Tracy Aloway: And if you enjoy OddLotss, if you like it when we talk about the Gulf region, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely adree. All you need to do is find the Bloomberg channel on Apple Podcast and follow the instructions there. Thanks for listening.