Almost every month, there’s another announcement about how various Gulf states will spend mind-blowing sums of money, hundreds of billions of dollars, if not trillions, in deals made with the new Trump administration in the US.In January, Saudi Arabia said it would broaden investments into, and trade with, the US to over $600 billion (€530 billion) in the next four years. US President Donald Trump himself then suggested that the sum could be as high as $1 trillion (€884 billion). And recent reports suggest the US will soon offer Saudi Arabia an arms package worth over $100 billion.Not to be outdone, the United Arab Emirates followed up with announcements in March that they’d be spending more than $1.4 trillion in the US over the next 10 years. Analysts say the pledge, which will focus on artificial intelligence, energy, semiconductors and manufacturing, is one of the largest foreign investment commitments in US history.Trump is expected to visit the Gulf states, Saudi Arabia, the UAE and Qatar, in mid-May when all those deals will be discussed further.But there’s a problem with what is being described as a kind of grand “investment diplomacy” by the Gulf states: falling oil prices.Lowest oil prices since COVID pandemicLower oil prices present a challenge to Middle Eastern nations who depend on oil for their national income. Although many oil-producing nations have been trying to diversify their national income away from hydrocarbons and into areas like tourism, financial services and technology, they’re all still heavily dependent on them.“There have been very impressive [Saudi] reforms in the last decade,” said Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington and expert on Gulf states’ economies. “But oil is still the heartbeat of the economy so when oil goes lower, it creates an environment that is not as favorable as when they are higher.”Oil prices fell dramatically after Trump’s on-again, off-again tariffs were first imposed in early April. The price for a barrel of Brent crude, an oil often used as a global benchmark, was just over $74 on April 2. After tariffs were announced, it fell to around $65 a barrel within a week and hasn’t really recovered since.Oil prices kept falling due to fears of a global recession resulting from erratic US policies. This week, they slid even further because the oil producing countries of OPEC+, the Organization of the Petroleum Exporting Countries, plus allies led by Russia, agreed to pump more oil. In simple terms, more oil on the market and less demand for it equals lower prices.Over the past week, analysts have also come up with new forecasts, confirming that oil prices will likely remain low into 2026. These forecasts spell problems for countries dependent on oil to finance their national spending. For example, in order to balance its planned budget in 2025, the International Monetary Fund has said Saudi Arabia needs oil prices around $91 a barrel. The UAE and Qatar only need them somewhere between $43 to $45.Besides “investment diplomacy” in the US, the wealthiest oil producers in the region obviously have other financial commitments.Saudi Arabia has its extremely expensive Vision 2030, a long-term plan to modernize the country and diversify away from oil, to pay for.The Gulf states are also being asked to commit to regional projects, such as rebuilding in Lebanon, supporting Egypt through its economic crisis and, the most expensive project, reconstruction in Gaza (should the conflict there end). Saudi Arabia has also said it would pay off the new Syrian government’s $15-million debt to the World Bank.How will this impact the Gulf’s big spenders?“UAE and Qatar are in a different position because even at these oil prices they will earn current account surpluses,” Callen told DW. “But Saudi Arabia won’t. So there will certainly be pockets of pressure on Saudi spending, from the domestic reform agenda to the commitments President Trump is going to be looking for.”But he doesn’t think this will immediately impact regional commitments. “With Syria, the amount is $15 million, that’s peanuts to Saudi Arabia and Qatar and it will be quite realistic for them to do that,” he explained.Funding over $50 billion worth of reconstruction in Gaza would be different, “a much bigger commitment,” Callen added. “So in terms of trade, investment and reconstruction in the region, at these oil prices, there will have to be some very careful decisions about where priories lie.”In the past, Callen said, when oil prices have decreased, the Saudis have tended to cut back on spending.“The [Saudi] government’s twin deficits in both the fiscal account — how it can spend — and its current account, how imports are exceeding exports, means there is an immediate need for fresh incoming dollars,” Karen Young, a senior research scholar at Columbia University’s Center on Global Energy Policy, told DW. “So if that can’t be met with increasing export receipts, it needs to be met with the sale of assets domestically.“Some observers have suggested Gulf states’ diversification away from oil might speed up. For example, given the lower tariffs the Trump administration has imposed on them, a place like Saudi Arabia would be more attractive as a manufacturing hub in the Middle East. But the problem with those suggestions, is that Saudi diversification plans are mainly being financed by the oil money, and there will be less of that to use.Promises to President Trump?“Without the current account surplus, there are basically no new funds to invest unless you borrow,” said Callen. “If the Saudis want to invest in new ventures, they’re either going to have to borrow in global capital markets or they’ll have to reallocate existing investments.”There’s another factor too. Last time Trump was in office, Gulf states made similar big-spending promises. But they mostly didn’t come to fruition. These new pledges should be seen in that context, experts say. For the UAE, investing $140 billion a year in the US over the next decade, means the Emiratis would be spending more than a quarter of their annual national income on the US. That’s “not viable,” Neil Quilliam, a fellow in the Middle East and North Africa program at London-based think tank Chatham House, told Arabian Gulf Business Insight last week. The pledge is more about sending a signal to the Trump administration, Quilliam said.And with oil prices dropping, “it’s even less likely that these promises can be met,” Callen argued. If Saudi Arabia spends or invests $600 billion in the US over the next four years, that equals $150 billion a year, or 12% of its own annual gross domestic product, he pointed out. “That’s just unrealistically huge,” Callen concluded.