The Washington Institute: Kuwait a Strategic Hub for Security and Energy in the Gulf
Iran’s War Opens a New Phase of Economic and Strategic Partnership with the United States
Defense spending is no longer merely a security item, but an investment to protect infrastructure.
The two countries are urged to launch a joint reconstruction initiative and expand cooperation.
A report issued by The Washington Institute for Near East Policy stated that the Iranian war in 2026 caused a reshaping of the economic and security environment in the Gulf. Kuwait was among the most affected countries due to its strategic location, as the repercussions extended beyond the security sector to trade, energy, investment, and defense spending, thereby opening a new phase of economic and strategic partnership between Kuwait and the United States.
The report concluded that recent developments reveal that Kuwait’s defense spending is no longer just a security line item, but has become an economic investment to protect energy infrastructure, stabilize trade, and enhance investor confidence. The war also underscores that the future of Kuwait’s economy is linked to its ability to combine the modernization of defense capabilities, secure energy exports, and deepen its economic and technological partnerships with the United States, thereby cementing Kuwait’s position as a strategic hub for security and energy in the Gulf.
Kuwait: A Logistics and Economic Hub
The Institute considered Kuwait to be one of the fundamental pillars of security in the Gulf since the signing of the Defense Cooperation Agreement following Kuwait’s liberation in 1991. Kuwait enjoys the status of a major non-NATO ally of the United States, in addition to more than $20 billion in active U.S. Foreign Military Sales (FMS) programs. Furthermore, Kuwait’s geographic location allows for rapid access to Iraq and the northern Arabian Gulf, making it a critical node for military logistics.
It clarified that the Trade and Investment Framework Agreement signed in 2004 strengthened economic relations between the two countries, while the Kuwait Investment Authority continues to play an influential role in U.S. financial markets.
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The Washington Institute report also highlighted that the war confirmed the theory that security and economics are two sides of the same coin. Oil facilities, power plants, civilian infrastructure, and water desalination stations in Kuwait were subjected to direct attacks. Additionally, navigation disruptions in the Strait of Hormuz impacted an economy heavily reliant on energy exports. Preliminary estimates indicate that Kuwait’s GDP contracted by 4.6% year-on-year during the first quarter of 2026 due to reduced oil production, disrupted maritime shipping, and a decline in non-oil activity, despite the contribution of the $16 billion "Shahin" oil pipeline project in boosting cash flows.
Defense Spending: A Long-Term Economic Investment
According to recent reports from the Stockholm International Peace Research Institute (SIPRI), Kuwait continues to expand its defense investments as part of a strategy to protect the national economy and energy security. Kuwait’s military spending reached $6.1 billion in 2024, equivalent to 3.7% of GDP, with an average annual growth rate of approximately 5% since 2012. Projections also indicate that the Kuwaiti defense market will grow at a compound annual growth rate exceeding 4% during the 2021–2026 period, driven by armed forces modernization programs and enhanced readiness.
The United States remains Kuwait’s largest defense supplier, with military sales exceeding $10.5 billion over the past decade, while the value of active foreign military sales programs surpasses $20 billion.
Energy and Supply Security
The war has highlighted the vulnerability of relying on the Strait of Hormuz as the main artery for Kuwait’s oil exports, prompting a reassessment of energy security strategies and supply chains. The Washington Institute, in its report, argues that ensuring freedom of maritime navigation is a fundamental prerequisite for the recovery of the Kuwaiti economy. It further emphasizes that the continued U.S. security role in the Gulf will remain a decisive factor in protecting energy exports and stabilizing global markets, particularly given the limited capacity of other international powers to contain regional escalation.
The report considers that the post-war phase extends beyond rebuilding damaged infrastructure to developing more resilient infrastructure encompassing energy networks, cybersecurity, digital infrastructure, and integrated defense systems. The Washington Institute recommends launching a joint U.S.-Kuwaiti reconstruction initiative, expanding cooperation in technology, energy, and digital resilience, thereby supporting the diversification of Kuwait’s economy and enhancing its attractiveness to high-quality investments.
