When missile alerts and falling drone debris briefly halted operations at Abu Dhabi’s Habshan Gas Complex this April, Gulf investors confronted a kind of volatility they were not positioned for. Oil prices surged on fears of disruption then retreated on news of ceasefire talks, but local equities and credit failed to stabilise. Unlike past crises, higher crude prices did little to cushion regional assets.
The difference this time was not just the scale of the shock, but its location. The disruption was domestic rather than external, directly touching infrastructure, transport routes, and investor confidence. That shift unsettled a long‑held assumption in Gulf markets: that oil strength offers automatic protection to local assets.
Market data bore this out early in the conflict. Correlations between oil and GCC equities turned negative in several markets, while domestically exposed sectors sold off even as crude prices rose.
“It is different,” says Hani Shalabi, head of equities execution at Arqaam Capital. “In general, external shocks have tended to translate into a positive force in the GCC markets, especially the UAE, fuelled by population growth and external investment into a safe haven. The domestic shock led to widespread selling.”
For allocators and trading desks alike, the defining challenge has been speed. Markets have repriced rapidly on successive headlines —ceasefire announcements, renewed hostilities, and disruption to shipping routes —often moving faster than investment committees or governance processes can respond. This mismatch has turned execution risk into a high-level concern, shifting attention from valuation to liquidity and timing.
That dynamic was clearest during the initial reaction phase. “The decision to de‑risk was very quick,” Shalabi says. More importantly, the biggest impact was investors getting locked into positions they couldn’t exit. Rather than spreads widening gradually, liquidity in some names simply vanished, leaving investors unable to act.
“That has eventually subsided,” he adds, “and markets have found a floor, if not moved up in some cases.”
But the episode has sharpened awareness of a familiar, and often under‑appreciated, reality. Performance is shaped not only by what investors own, but by when and how they are forced to transact. Poor liquidity windows can impose costs unrelated to underlying conviction: wider spreads, partial fills, or delayed exits, or in stressed conditions, funding and settlement strain across custodians and counterparties.
This is where cash has been redefined. Rather than being treated as residual or defensive capital, liquidity is increasingly viewed as an execution buffer and risk‑control tool — a way to stay out of disorderly markets rather than be forced to trade through them. Higher interest rates have made cash less punitive to hold, while tighter settlement cycles and compressed reaction windows have made timing operationally critical.
Global flows reinforce that shift. Institutional money‑market funds have absorbed trillions of dollars in recent years, reflecting demand for instruments that deliver yield without sacrificing immediacy. In the Gulf, similar logic applies through a mix of bank deposits, short‑dated bills, sukuk and money‑market vehicles, increasingly managed as a dedicated liquidity sleeve rather than an afterthought.
From an execution perspective, that liquidity is already being positioned tactically.
“I think that investors are definitely holding dry powder to deploy for a turnaround trade,” Shalabi says. The key, he suggests, is selectivity. “Some companies will recover quickly, while some, structurally, will take time. But having the cash ready is important, as the conflict is far from resolved.”
Timing, however, cuts both ways. Periods of rapid escalation and de‑escalation have produced intraday and multi‑day whipsaws, forcing investors to reassess not just asset allocation, but how quickly capital can be mobilised without paying a liquidity premium. As markets repeatedly reprice ceasefire headlines, energy risk and shipping disruptions, immediately deployable cash has become more valuable — particularly for allocators with global exposures and limited tolerance for forced execution.
But beware complacency. Liquidity is not evenly distributed, and “near‑cash” instruments do not behave identically under stress. Counterparty concentration, intraday funding squeezes and governance frictions can all undermine assumptions about access when it is needed most. The risk is not holding too much cash, but assuming it will be there on benign terms.
For Gulf investors navigating a market where geopolitics, infrastructure risk and market structure increasingly intersect, cash is no longer passive. It has become a strategic input - shaping not only what risks are taken, but how and when they are expressed.
