On January 14, the World Economic Forum highlighted that Geo-economic confrontation has become the most severe global risk over the next two years, demonstrating a global shift towards economy-based tensions.
In its Global Risks Report 2026, the World Economic Forum ranked geo-economic confrontation first in severity over the short term, followed by misinformation and disinformation, societal polarisation, extreme weather events, and state-based armed conflict. According to the report,
Geo-economics is the use of economic tools to achieve geopolitical goals. Instead of waging war on a country, sanctions, tariffs (looking at you, Trump), and investment controls are used to shape a country’s economy.
Perhaps the most well-known example of such practice is the 19 packages of sanctions imposed on Russia by the European Union. Advertised as a measure to pressure Russia amid the war in Ukraine, these sanctions targeted energy exports, key industries, financial institutions, and access to European markets.
Moscow successfully mitigated much of the damage through alternative trade partnerships, domestic production adjustments, and strategic financial planning. The example of Russia offers a key lesson to the Middle East, a region defined by energy exports, trade corridors, and strategic geography.
One of the major fronts in the global geo-economics landscape is the one between China and the United States. While this faceoff between the United States and China remains the most watched globally, according to the WEF’s report, the ripples of this confrontation extend beyond the two superpowers, and the Middle East is vulnerable to these ripples, as well as countries in the region.
Middle East Energy: caught in the crossfire
Trade between China and members of the Arab League, which includes most Arab countries, reached 241.61 billion US dollars during the first seven months of 2025, official data published by Xinhua on August 26, 2025, revealed.
Furthermore, China overtook the United States, Britain, and the Eurozone combined to become the Gulf region’s largest trading partner, according to a report by the UK-based think tank Asia House. The report also projects that Gulf-China trade will reach 375 billion USD by 2028, further underscoring China’s role in the Middle East.
Another important matter at hand is China’s status as one of the largest buyers of Middle Eastern crude: Chinese customs data reveal that Chinese oil imports from the UAE in October 2025 hit a record high of 3.82 million tons, double that of October 2024, while imports from Kuwait rose from 970,000 tons to 2.36 million tons. Saudi Arabia exported 7.02 million tons of crude to China in the same month, and Iraq supplied 5.05 million tons.
Beijing’s rising trade dominance in the Middle East exposes the region to the economic tensions between the United States and China. As the two countries clash over tariffs, technology, and sanctions, trade measures between them are sure to affect the MENA region, from oil demand to investment flows, and access to critical technologies.
Tariffs and oil
As the confrontation between China and the United States intensified in February of 2025, crude oil prices hit their lowest point since December 2024, with Brent crude futures dropping to $74.61 a barrel. This low coincided with Beijing announcing that it will impose a 15% levy on coal and liquefied natural gas from Washington, in addition to a 10% duty on American crude oil, among other items.
In October of 2025, Brent crude was trading at $62.68 a barrel, following threats by Trump to impose higher tariffs on Chinese goods following Beijing’s restrictions on rare earth elements, only to announce a 100% additional tariff on Chinese goods effective November 1, 2025.
These fluctuations in global crude prices directly affected Middle Eastern producers, whose economies remain heavily dependent on oil exports. Lower Brent prices meant that Gulf states like Saudi Arabia, the UAE, and Kuwait earned significantly less per barrel, putting pressure on national budgets that are often calibrated for $75–$80 per barrel or higher.
For example, Saudi Arabia’s finance ministry projected that a sustained drop of $10–$15 per barrel in Brent could reduce oil revenue by tens of billions of dollars annually, forcing adjustments in spending on infrastructure, public wages, and investment projects.
US confrontation with China and what it meant for the Middle East
Similar to China, US sanctions targeting Iran’s oil sector have had spillover effects across the Middle Eastern energy market. New rounds of sanctions in 2025 aimed at companies and vessels involved in Iranian crude exports raised the cost and complexity of shipping Iranian oil, slowing formal flows to major buyers such as China.
This disruption reshaped export patterns within the Middle East as Iranian crude faced tighter restrictions and heavier discounting. Asian buyers, particularly China, increased purchases from Gulf producers to secure a stable supply. The result was a measurable reallocation of crude flows toward countries such as Saudi Arabia, the UAE, and Iraq, reinforcing their role in Asian energy markets even as global demand growth softened.
At the same time, sanctions-related uncertainty fed into oil price volatility tied to benchmarks like Brent, which underpin Gulf export revenues. Enforcement actions and supply concerns periodically shifted market expectations, affecting pricing stability and fiscal planning across oil-dependent Middle Eastern economies.
The balancing act: how the MENA absorbed the shock
Middle Eastern countries have navigated the consequences of these geo-economic confronations with a strategy of balance rather than alignment. Instead of limiting themselves to aligning with one side, Gulf states in particular sought the expansion of ties with both powers, proving indispensable to both China and the US.
This balancing act becomes especially visible in the energy sector. As Chinese buyers reduced imports of US liquefied natural gas, the China National Offshore Oil Company signed a five-year LNG agreement with the Abu Dhabi National Oil Company for 500,000 metric tons annually beginning this year.
At the same time, Gulf governments have deepened economic engagement with the United States to hedge against overreliance on China. The United Arab Emirates committed to a 10-year, $1.4 trillion investment framework in the US, spanning energy, artificial intelligence, semiconductors, and manufacturing. As part of this push, ADQ partnered with US-based Energy Capital Partners in a $25 billion initiative targeting American energy infrastructure and data centres, while ADNOC announced plans to expand its US energy investments significantly in the coming decade.
Saudi Arabia has similarly reinforced its US economic ties. In 2025, Riyadh outlined plans for a $1 trillion US–Saudi economic corridor by 2030, alongside major agreements including an estimated $142 billion arms package and tens of billions of dollars in AI and technology partnerships with US firms. These moves underscore how Gulf states are strengthening strategic economic links with Washington even as trade with China continues to expand.
Trade as a Test of Strategy
The World Economic Forum’s Global Risks Report highlights that traditional multilateral systems are weakening and rivalries between major powers are reshaping global governance, signalling a competitive landscape where cooperation norms are eroding, and new power centres are emerging
As geo-economic confrontation looms as the top global risk for the next two years, the path ahead for the Middle East and the rest of the world relies on pipelines, shipping lanes, and trade contracts. The ability to navigate sudden tariffs, sanctions, and disruptions to supply chains is as critical as traditional military deterrence, especially when the consequences of such confrontation ripple across the region.
As the global balance slowly shifts towards a multipolar world, where power is shared among several economic and political centres, militaries alone become insufficient. For countries in the Middle East, cultivating ties not only with the main parties of geo-economic confrontations, as well as other regional and global actors, allows for flexibility and alternatives in the face of sudden and unexpected unilateral pressure or changes brought on by unilateral actions.
Ultimately, as the world becomes more multipolar, the capacity to manage geo-economic confrontation will define which states can safeguard sovereignty, stabilise their economies, and secure long-term prosperity.
