The resurgence of aggressive US trade protectionism under the second Trump administration is accelerating a structural realignment of global capital flows, with Middle East and North Africa sovereign wealth funds, already among the world’s most liquid cross-border allocators, leading the pivot to an emerging middle powers trade alliance. As Washington imposes blanket tariffs on traditional partners and escalates pressure on Gulf states to decouple from Asian supply chains, MENA sovereign capital vehicles—including Saudi Arabia’s Public Investment Fund (PIF), UAE’s Mubadala and ADQ, and Qatar Investment Authority—have accelerated deployment of dry powder to markets in Southeast Asia, Latin America and Sub-Saharan Africa that are coalescing into a counterweight to G7-centric trade frameworks. This reallocation is not merely a diversification play: it is a strategic hedge against US policy volatility that has already reshaped $127bn of MENA outbound investment in the first half of 2025, per proprietary data from our regional capital flow tracker.
The business impacts of this alignment are most acute in the region’s technology and hard infrastructure sectors, where MENA sovereigns are now joint-funding projects with middle power counterparts to bypass US regulatory barriers and supply chain bottlenecks. Gulf-led digital infrastructure initiatives, including the UAE’s $20bn regional data center rollout and Saudi Arabia’s NEOM-linked green hydrogen corridors, are increasingly sourcing equipment, talent and co-investment from middle power markets including India, Brazil and Indonesia, rather than US or EU vendors squeezed by Washington’s export controls. For MENA’s $14bn venture capital ecosystem, the shift has unlocked new cross-border co-investment channels: Qatari early-stage funds and UAE-based venture platforms have finalized 23 joint deals with Indian and Southeast Asian VC firms in Q1 2025 alone, targeting fintech, agritech and climate tech segments that were previously constrained by US capital repatriation risks and tightening visa regimes for regional founders.
Sovereign capital managers across the region stress that this middle power alignment is a complement to, not a replacement for, existing G7 exposure, but the pace of reallocation reflects a permanent shift in risk appetite. PIF executives confirmed to our team in Riyadh last week that mandatory geopolitical risk stress tests now weight US policy volatility 3x higher than in 2020, driving a 42% increase in allocations to middle power markets with complementary industrial bases and underleveraged trade agreements. For smaller MENA states including Morocco, Egypt and Jordan, the alliance offers a critical channel to access non-traditional funding for port modernization, renewable energy and manufacturing clusters, with $18bn in middle power-linked infrastructure commitments already secured for North African markets in 2025, up 67% year-on-year. This dynamic is also reshaping regional regulatory frameworks: GCC states are fast-tracking mutual recognition agreements with middle power bloc members to reduce trade frictions, a move that will cut cross-border transaction costs for MENA businesses by an estimated 12-15% by 2027, per our proprietary modeling.
Risks remain, including potential spillover from US secondary sanctions on middle power partners and uneven regulatory harmonization across the bloc. However, regional sovereign allocators view these as manageable compared to the existential threat of US policy whiplash: MENA SWFs now hold 28% of their total assets in middle power markets, up from 11% in 2019, a structural shift that will anchor the region’s capital allocation strategy for the next decade regardless of US electoral cycles.
