Ziad Daoud Explains How War with Iran Will Reshape the Gulf

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes, or just ask Alexa, play the podcast OddLots on Amazon Music. When you're growing a small business in London, you need someone who understands the ins and outs. With HSBC's Small Business Growth Program, you can access the tools you need to succeed, with insights, events, and bite-sized training. HSBC UK, proud to support small businesses. To get started, search HSBC Business Growth Program. Subject to application, eligibility, credit check, and T-sensees, visit hsbc.co.uk for details. Hello and welcome to another episode of the OddLots podcast. I'm Tracy Allaway. And I'm Joe Wajnthal. Joe, it is currently April 10th. That's right. 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 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, many people around the world is 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's just a gigantic war and wars, even short ones, potentially, have all kinds of ripple effects and scars and so forth. And it'll change, obviously, the course of the region. Yeah. The way I think about it is the Gulf region was sort of a center of, let's say, three things. So energy, oil, and resulting petrochemicals, which we've talked a lot about, capital. Capital, yeah. So 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, U.S. 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, et cetera, right? So at various times, do you disagree? 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. 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, et cetera. And so over years, we're in multiple Gulf wars, et cetera, the war in Gaza that's been taking place over the last multiple years. I mean, there's just extraordinary, there's just a long history of conflict. 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 we are going to be speaking with the chief emerging markets economist over at Bloomberg Economics, Zia Daoud. Someone we've spoken to before, I think our last episode 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 being in London for the past few weeks. So Zia, thank you so much for coming back on a lot. Thank you for having me, Jo and Tracy. So out of curiosity, what have the past few weeks been like for you as someone who has not, you know, not just living and breathing Gulf economics, but also physically living in the region for the past few years? 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 unprecedented, I think, for the region. But yeah, it was expected, but it was still different when you feel it, than when we just anticipated. 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. or pointing to possible war, or is 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? I think for us, and we've done this in writing and I've done that mostly with my colleague, Dina, Sven Deyari, 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 U.S. 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 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 with things that there will be a war 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. 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 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? For them, I think it's probably their worst nightmare. In some sense, it's an outcome they had tried and loved it 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 a 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 came after months of delay. And we were, among other people, were asking 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 injected a lot more barrels of oil into the market to lower oil prices. But potentially against some of their economic interests. They pledged trillions and trillions of dollars of investments and deals in the U.S. 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 Qatar. A month later, a war erupted between Israel and Iran, which the U.S. intervened in. Four months later, Israel bombed Doha in Qatar where Trump was in May. And about a year, less than a year later, in fact, we have a regional war 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 the clear, basically, choice which he chose Israel over the Gulf. One of the things you hear about or people talk about is, OK, the U.S. 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? If all of it was able to stop, the U.S. was not able or has not been able to open the Strait of Hormuz unilaterally. And actually, at the moment, Iran clearly controls it. Does this fundamental premise, like setting aside how people feel, if the U.S. does not have the capability, the missiles, the missile defense, etc., to actually keep secure of the infrastructure, to keep the Strait 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 is a dimension where you have the military equipment and there is a dimension where you have sort of the political will and the strategic side of it. In terms of military equipment, I think U.S. military equipment may have proven their worth. A lot of drones, a lot of missiles were thrown at the Gulf, and very few percentage of this has filtered through. 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 U.S. 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 U.S. 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 U.S., except in one area where defense, the U.S. completely dominates. 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 U.S. security umbrella disappoints the Gulf. This is one episode out of several. There is 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 U.S. protection that it wanted. You know, in 2018 and 2019, 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 U.S. was nowhere to be seen. So I think the security umbrella, the political umbrella for the U.S. security is definitely there is a challenge there, and it hasn't delivered uncertain importance. It's not an important point of time, but when it comes to the military equipment, I think that has proven its worth. On Up First from NPR, we bring you three of the world's top headlines every day in under 15 minutes, because no one story can capture all that's happening in this big, crazy world of ours on any given morning. Listen now to the Up First podcast from NPR. Can we talk about intra-Gulf relationships for a second because 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 frenemies at this point. So 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? Right. So the big story in the Gulf in terms of intra-Gulf relations before February 28th was there was a big Saudi and the 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 were 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. They share almost the same ethnicity, same language, same religion, same coastline, same geography, even at times 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 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 status 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 Qatar 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. These six countries are all monarchies, all oil and gas producers that have the same foreign relations or sort of foreign relations strategy. And it's actually very different now that at least three or four sides to it. The other point of contention that I think was sort of like coming to the fore, 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 petrochemicals, build up tourism, build up the technology centers. Everyone's going to be 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? That's a great question, Tracy. 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 all prices were volatile because if all 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. It was crypto for a while too. 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 with 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 Abu Dhabi, an old one in Minam 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, six weeks instead of 10 days there. They're going to spread 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. Tracy, do you know the name of Qatar's first LNG carrier? I have no idea. What is it? It's a very random trivia question. I came across the other day. Do you know? No, I don't know. Their first LNG carrier is the ship, the Rex Tillerson, because he got involved to end that blockade you talked 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 LNG carrier. That's amazing. Yeah. It's right now. But wouldn't be the case that Rex Tillerson used to be the CEO of ExxonMobil. One of the early companies that went into the Qatar LNG industry. There you go. So 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 the stuff like went to war with Iran, at least it chose the security preferences of Israel as 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? I think there's a few things here. I think the first thing is, is your right to point out the flare up in the Middle East did not start on February 28th, 2026. The Middle East has been an 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 strait of Hormuz and because energy facilities in the Gulf are being hit, energy has been weaponized now unlike the war was happening before February 28th. 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, Sam 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. And at least three of them, Kuwait, the UAE and Qatar, have enormous hydrocarbon wealth relative to the size of the population. And if you have that, then that can lubricate a lot of things and that can calm a lot of things done. That's a very different condition than, say, Jordan, which is sort of the... Or Egypt or other places. Yes, that's exactly right. That's the unique thing about the Gulf 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 petrodollars 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 calm and that cohesiveness when oil becomes worthless 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 trade-offs versus other bigger countries in the region. 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? 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 Middle East goes through this small choke point that's called the Strait of Hormuz, which exposes the world because it can cost supply, but also it's important for these countries to get their oil out and gas out and get their money in so they can sustain their economies and investments and so on. Now, I think this war has taught us a third thing. If you have a route out of the Strait of Hormuz, you're probably insulated and you are in better position than otherwise. A route besides the Strait of Hormuz, right? Or an alternative. Yeah, okay. Yeah, so I think, for example, I think now Saudi Arabia is probably making more money out of oil 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 simple maths. 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 is probably making more income out of oil exports despite what is going on in the region. Obviously, threats that 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 UAE and you have this alternative routes to Hormuz, 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 going to you because you can do this unilaterally. You can just have a pipeline from Abu Dhabi to Fajera. You don't need to go through other countries. You can have a pipeline from the east of 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 Qatar, you have to do it through other countries. Other has only one land border, which is Saudi Arabia. So if they want to have an alternative to having Restellersen 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. Globalization is so beautiful because I'm just, sorry, I'm reading about the Restellersen 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 Houdang Zhonghua shipyard in China, which of course is where it was built. It's just so beautiful. Was Restellersen there? I don't know. I hope he got to smash the glass or he's going to smash the champagne glass. Is that still an active tanker or is it still flowing? Yeah, it is because I'm looking at MarineTraffic.com. It's 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. Better than being stuck in the Gulf. Yeah, yeah. It's not stuck. Actually, that was one of the interesting things that we talked about in our episode with Bob Brackett, which is that actually a lot of the Qatar's LNG revenue right now is from exports from the port of Houston because it's involved in the investment there, et cetera. 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. Oh, I'm so sorry. I'm Googling the Restellersen stuff. And I just learned that Rex Tillerson is not the only American official to have an energy carrier named after them. Guess what the other one is. Okay, Chevron once named an oil tanker the Condoleezza rice. That's great. I love that. But 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 on crypto and you don't really have anything to do. It's like, okay, like, I know there's more of the Dubai economy than that. I'm made a little bit facetious, et cetera. 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, et cetera. Will that trend continue in the same way that it had been? So let me just tell you something about the Dubai attractiveness. Yeah. Every time I came to London, and obviously our Bloomberg offices in the city, and I saw old friends, seriously, every time people asked me, how can we move to the Middle East and how can we move to Dubai? And these people have no links to the Middle East. That's incredible. I think it's an, and let me just give you another example, actually. In late 2024, I took sabbatical from Bloomberg and I was teaching at Harvard. And 20% of my office hour was people asking me how to get jobs in the Middle East. That's incredible. We were these Americans asking you? And mixed, yeah. But so it's not just informers and pretty people. It's like a lot of brainy people also wanted to move there. 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 reported story of this 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... Yeah, I think what it offers you, and this is why, 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. 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 just like zero taxes 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. Yeah, it's actually a nice life. So I think people who live there, I think they're going to prove to be stickier than we think. I think where there will be probably challenges that the questions I've been getting about, 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 war lasts. I think there's something else that happened in Dubai, why its attractiveness increased after the pandemic is that you have the network effect. People have their friends moved into Dubai. They thought, oh, you know what, the weather is good. Taxes are really, really zero and life is nice and you get all the support that's on the experience. Things are convenient. And then people had network of friends that are already there and they're willing to move there and live there. So I think that's the element of it. I think in terms of the long term aspect of it, I think people who live there are probably getting proof stickier than we think. The attraction of new people is probably going to ease on the margin. But again, there was a whole long queue of people who wanted to move there and probably, yeah, that might slow a bit, 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. And that's one of the reasons why the real estate market has taken off since 2020. Just one related question on this. How can I move to Dubai? Ask Tracy. She was there for a few years. What do I have to do? No, but for real, what are the basics? First of all, you'll still be paying taxes, Joe, as an American citizen. Oh, yeah, right. So, forget about that. I'm Christina Rafini. We'll bring you the latest headlines, in-depth analysis and big interviews. All the stories that hit home on your days off. And I'm Lisa Matteo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people and culture. On Saturday mornings, we put the past week's events into context, examining what happened in the markets and the world. That on Sundays, we speak with journalists, columnists and key political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you. Watch us on Bloomberg Television. Listen on Bloomberg Radio. Stream the show live on the Bloomberg Business app or listen to the podcast. That's Bloomberg This Weekend. Saturdays and Sundays starting at 7am Eastern. Make us part of your weekend routine on Bloomberg Television, Radio and wherever you get your podcasts. Blowing out budget on metrics that look great till the CFO sees them. That's bull spend. And marketers are calling it out in... Dashboard Confessions. I remember telling my boss, it'll be good for the brand when leads were slow. Yeah, it wasn't. Cut the bull spend. LinkedIn lets you target by company, job title and more. Advertise on LinkedIn. Spend £200 on your first campaign and get a £200 discount. Go to LinkedIn.com. Can we do local economics in Dubai for a second? Because if I go on some of the message boards, and again, I think one important thing to recognize here is that social media in the UAE 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? 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 ships going through the Strait of Hormuz, where the attacks on Dubai ease a bit, and the UAE in general and the Gulf in general, that is a very different world from if the world continues until June or July or August for six 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 companies. Every company that where we are in Dubai, for example, we're in Dubai International Financial Center, and that has grown significantly since the pandemic. They're doing a new expansion and offices are full. And even our Bloomberg office, we expanded into a new floor in Dubai. Actually, that reminds me, since we're talking about the DIFC, 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 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? So a few things. I think Saudi is not making more money than ever. It's just making more money than when oil is at $65 per barrel. Sure. Oh, yes, of course. Yes. In terms of the direction of capital, and you're right, I think the way I think about the Gulf is that the Gulf supplies the world with three inputs, supplies it with energy, 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 to three prices. It gets the price of interest rates because they have tax 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 all 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 have in 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 six weeks. And second, because they've realized that the world is a far more dangerous place than it was six weeks ago. Iran is more dangerous. Israel is more expansionist. And then you have these, you know, non-state actors, Iraqi militant groups, who it is 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 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, I don't know, real estate in London or in Egypt or Turkish bank deposits or tech companies. You guys hosted my colleagues, Tom Oleg and Jamie Rush on the book that Mechanomics wrote on the price of money. We had a chapter on that on petrodollars and how petrodollars actually suppressed long-term interest rates in the U.S. Okay, it was 25 basis points, but given the size of the U.S. economy and the size of its debt, that still tens of billions of dollars every year. If there's less flow into there, that will affect not just these smaller markets, but also the deepest market in the world, which is the U.S. 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, and it'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 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 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? I think there's a couple of things to mention here. The first thing is, as far as Iran is concerned, I think this last past six weeks have taught us something. And I keep saying things taught us something, but we keep learning from 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 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 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. Israel had a clear goal, but it probably wasn't achievable, which is regime change in Iran. And the U.S. is just confusing what they're doing in terms of this war. There's no clear or well articulated goal for this current war. And I think that's why Iran is punching above its weight. What does that mean? I don't know if Iran is going to emerge as a power, but given that it's punching above its weight, given that it's controlling the straight of hormones, given that it actually has discovered that the way to pressure the U.S. and Israel is by imposing costs 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, 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 hormones 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. Can I ask one more question, which is you mentioned the expansion of the Dubai Financial Center. DIFC 2.0 and I'm looking at some of the mock-ups for it. It's supposed to be completed in 2040, but all of the mock-ups, very beautiful, lots of shiny glass buildings. And what I'm thinking about potential changes from the Iran war, one very visible one would be, well, maybe there aren't as many very tall glass buildings in places like Dubai that can end up getting damaged by drones. But do you expect an actual physical change to the city's architecture as a result of this? So this is what I think also the war would hit, like unexpected corners beyond, you know, defense and relationship with the U.S. and the straight of hormones. It's also architecture, you know, there's a lot of building that's taking place and all these cities in the Gulf are growing. The problem is that when you were in Dubai, you know, living on the 20th floor and you get the alerts saying, you know, it's under attack, stay away, don't go out and stay away from windows. So, you know, your place is floor to ceiling of windows. You have to go down into the car park where there's no air conditioning. Some people did, some people did. And it's also, I don't know if it's safe to be next to cars or inside cars. So the mud be rethinking about this, the mud be rethinking, you know, this is what wars do. They change a lot of things and a lot of perspectives on things. And that goes into corners that we didn't think about before, including architecture. I always think the example 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 participatory political system at times, a parliament that was quite loud and vocal. Infrastructure 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, and 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. Wow. So, 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 trace. All right, Dia Dowd, thank you so much for coming back on OddLots. Truly the perfect cast to walk us through all of this. Really appreciate it. Thank you for having me. Yeah. Joe, that was a great conversation. Yeah. As always, truly the perfect guest. 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 was very interesting. And the Kuwait example he cited was very compelling. 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 and the wake of a war that happened over 35 years ago. Crazy. 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 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 market's back and maybe hopefully, you know, maybe the ceasefire will hold longer or the ceasefire will turn into the end of the war, etc. It seems obvious there's going to be major ramification. Yeah, the other thing that stood out to me was the short comment about petrodollars, which is really what we mean when we're talking about capital emanating from the Gulf. 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 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 Strait 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. 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 build out. 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. Yeah, it feels very inflationary. Yeah, exactly. All right, shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Joe Weissenthal. You can follow me at the Stalwart. Follow our guest, Zia Dawood. He's at ZiaDM. Follow our producers, Carmen Rodriguez, at Carmen Arman, Dash O'Benet, at Dash Bot, and Kilbrooks at Kilbrooks. And for more OddLots content, go to Bloomberg.com slash OddLots for the daily newsletter and all of our episodes. And you can chat about all of these topics 24 seven in our Discord, discord.gg slash OddLots. And if you enjoy OddLots, 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 ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening. I'm Francine Lacroix, an award-winning journalist, and I've got a new podcast. Leaders with Francine Lacroix from Bloomberg Podcasts. I've interviewed everyone from heads of state to fashion icons about the news of the moment. But I've always been curious who are these people as leaders? I don't think there's one right way to be a leader. Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow Leaders with Francine Lacroix wherever you get your podcasts.