Middle East: How Oil is Funding the Post-Oil Era

You pictured them in football? They’re actually investing in healthcare. You thought their projects were all mega-scale? They have lighter ones too. Middle Eastern sovereign wealth funds are diversifying fast, betting on resources more sustainable than oil to make new opportunities emerge from the desert.

In the desert, oil flows not only to the global markets; it also finances futuristic projects, major European football clubs, and Silicon Valley start-ups. Fuelled by petrodollars, sovereign wealth funds have become the Gulf monarchies’ new instruments of power.

With more than US$4 trillion in assets under management, Middle Eastern sovereign wealth funds rank among the most powerful in the world. Their role has expanded considerably. Historically, they kept to traditional financial investments. Now, they invest in strategic sectors, aiming both to secure returns and to develop economies less dependent on hydrocarbons.

Shock Treatment

While their investments are of comparable scale, their strategies are very different. Qatar long favoured passive stakes in major international banks before shifting toward more strategic areas such as technology, sport and fintech. The UAE, on the other hand, continues to focus on sport and to build on its long-standing commercial and tourism traditions, while Kuwait maintains a more cautious approach. While their approaches differ, they all reflect the same urgent need: to transform oil rents into alternative pillars of economic growth.

Beyond their investment function, these funds also act as a fiscal anchor. When oil prices fall, they cushion budgetary shocks and help to keep public finances stable. When oil prices rise, they channel surpluses into a range of assets. These sovereign wealth funds balance stability in the present with financing for the future, walking a fine line where every decision carries double weight.

Layered Investments

A close examination of their investments reveals a hierarchy. Two sectors stand out as real strategic drivers: technology and healthcare. These areas are where the funds are finding returns and strategic purpose. By investing in biotech, artificial intelligence and medical innovation, they are anticipating new engines of growth capable of extending their economies beyond reliance on oil rents.

One level below, infrastructure provides the foundations of diversification. Roads, energy supply, networks… without these, no lasting diversification is possible. Such investments do not yield immediate returns, but they help lay the groundwork for more robust development.

By contrast, sport and tourism are largely for show. Despite having limited economic impact, football clubs and major international events capture attention and build soft power. This work on image is deliberate: becoming a leading player in sport or the green transition helps to strengthen international standing, even at the expense of short-term profitability.

Finally, venture capital illustrates the element of risk-taking. It bets on emerging innovative companies promising returns far higher than those of traditional sectors. It is risky and uneven but full of opportunity, and while some projects take off spectacularly, it remains marked by high volatility, which limits its ability to produce tangible short-term effects. The choice to invest in the United States, Europe and also China is not driven purely by economic considerations; it is a way to broaden geopolitical alliances, including with the BRICS countries.

The Test of Time

These sovereign wealth funds’ financial power alone does not guarantee the success of their diversification efforts. Strategic projects across different sectors take time to mature, and they mobilise substantial capital without delivering immediate results. At the same time, political pressure imposes a different logic: leaders must rapidly demonstrate the benefits of diversification, both to meet domestic expectations and to project success internationally. This tension explains the coexistence of spectacular mega-projects and initiatives that are more discreet but nonetheless essential to building productive sectors.

Governance is critical. When decision-making is guided by a clear mandate, transparent criteria and a disciplined allocation of capital, the funds manage to transform their billions into drivers of sustainable growth. This is exemplified by the annual report of the Mubadala fund (UAE), which demonstrates a long-term strategy and diversification of assets through its project selection. Conversely, when management is opaque and decisions are concentrated in the hands of a few, projects are viewed as symbolic and costly rather than as vehicles for value creation.

Ultimately, what matters is how the money is allocated. Billions can be mobilised, but, according to a senior executive of the Qatar Investment Authority (QIA) we interviewed, without any resulting local economic benefits, skills transfer or skilled job creation, such investments have little lasting effect on diversification. It is over time that part of the post-oil promise takes shape.

The sovereign wealth funds are pursuing several objectives at once: preparing future generations, diversifying economies overly dependent on hydrocarbons, and increasing their respective states’ soft power. These three priorities explain why they alternate between strategic investments and more spectacular projects designed to make a strong impression. Yet beneath this diversity lies a persistent fragility: the difficulty of turning their billions into a solid local economic base when skilled labour and domestic production structures are lacking.

Revolution or mirage? The answer still lies somewhere in between.