US government shutdown threatens investment climate for Gulf money

The partial closure of US government operations amid stalled budget talks in Congress raises questions about the long-term reliability of the country as a destination for hundreds of billions of dollars in new GCC investment, finance experts have said.

Reuters | Politicians in the US Capitol failed to reach an agreement to avoid a government shutdown

• Closure began October 1

• Slows trade negotiations

• Delays reviews of foreign investment

The shutdown officially began on October 1, the first day of the new US fiscal year. It came after Republicans and Democrats in the House of Representatives and Senate failed to find a compromise to fund federal activities on a temporary or permanent basis.

Hundreds of thousands of government employees across the country that are deemed non-essential will be asked to stay home without pay until the impasse is resolved. Many more will work but not receive a salary.

The furlough is likely to affect some 34,000 workers at the Department of Commerce, and more across other relevant agencies. It will slow negotiations over new trade deals amid President Donald Trump’s far-reaching tariff wars, according to Rachel Ziemba, who leads a macroeconomic risk advisory firm in New York.

The shutdown also delays government reviews of inbound foreign investments and joint ventures in sensitive industries. This will add to uncertainty around the business climate, she said.

Enforcement of customs regulations and levies is deemed essential to national security and will continue to be staffed, Ziemba added. The same is true for immigration, including the processing of those who arrive in the US for leisure or business.

Air travel should in theory be safe from disruption, as air traffic controllers and airport security personnel are also treated as essential workers.

However, in the shutdown at the end of 2018 and beginning of 2019, many such employees called in sick, significantly impairing regular operations.

That closure, the 20th since 1976, stretched over a record 35 days, although most have typically gone on for a few days to a couple of weeks. This year’s budget stalemate is the third to take place under Trump following two during his first term.

The ultimate effect of this newest iteration largely depends on how long it lasts, said Justin Alexander, a US-based economist with Khaleej Economics who focuses on the GCC.

“Irrespective of any short-term operational impacts, the main message it holds for the Gulf is a reminder of the division and dysfunction in the US government,” he told AGBI. “That is not encouraging for countries that have invested hundreds of billions of dollars here and have pledged to do much more.”

Dozens of high-profile deals between Gulf and US counterparts in domains including advanced technology, energy, mining and aviation were signed during Trump’s visit to the region in May, and more have followed since.

A prolonged shutdown of more than a few days may also put downward pressure on the US dollar, to which currencies in the Gulf are pegged or heavily weighted toward.

“Similar to 2018, an extended standoff may weaken the dollar should markets bet that the shutdown could harm the US economy and prompt a faster pace of Federal Reserve interest-rate cuts,” said Matthew Ryan, London-based head of market strategy at Ebury, a fintech company that specialises in international payment and foreign-exchange services.

“This remains a distant scenario for now, but markets will be wary of a repeat from Trump’s first term,” Ryan said in a statement.

The dollar fell in early Wednesday trading but recovered losses during the day.

By Valentina Pasquali

October 2, 2025, 2:42 PM