The Australian investment firm Macquarie dropped out of a $7 billion deal to buy a stake in Kuwait’s oil pipelines. This makes them the first major investors to walk away from a Middle Eastern deal due to the ongoing war in Iran.
The situation in the Gulf has become extremely risky because Tehran has blocked the Strait of Hormuz. Kuwait has no way to supply its oil, currently leaving over millions of barrels unsold. Macquarie reportedly informed the Kuwait Petroleum Corporation (KPC) that the uncertain outlook and the conflict made the investment too dangerous.
Even after all these issues, Kuwait is still trying to push the sale through. The timing was unfortunate because the deal was made just hours before the Iranian missiles started hitting the Gulf cities. Some big names, like BlackRock and KKR, had previously shown interest, but it is now unclear whether they remain willing to participate, given the pipelines’ proximity to Iranian military assets.
Apart from tensions related to oil, projects such as a $500 million cooling system sale in Saudi Arabia and a $266 million water asset deal are still moving forward, but with caution. Investors are now worried about material, adverse changes in clauses and legal loopholes that allow them to cancel contracts if the war makes the business environment too unstable.
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While some experts believe that the region’s long-term economy will remain strong, the reality feels a little different. Leaders might charge higher interest rates to cover the risk of war, and some investors are calmly waiting to see how the conflict unfolds before committing billions of dollars to a volatile region.
