Funding For Futuristic Saudi City Raises U.S. Mortgage Rates

If Donald Trump truly wanted to lower interest rates, he picked the wrong target. Pressuring Federal Reserve Chair Jerome Powell into rate cuts has rattled markets.

Neom’s price tag is just one part of the Gulf’s massive spending spree. (Image: NEOM)

A smarter move, according to Ziad Daoud in Bloomberg Weekend, would be convincing Saudi Arabia’s Crown Prince Mohammed bin Salman to scrap his trillion-dollar city, Neom.

Neom was once pitched as a city of flying taxis, artificial moons, and glow-in-the-dark beaches. Its initial budget was $500 billion, but it has likely ballooned to trillions of dollars.

Neom’s price tag is just one part of the Gulf’s massive spending spree.

Saudi Arabia is hosting global events and buying football stars, while its neighbors are pouring oil wealth into sports, infrastructure, and investments — turning them into tools of global influence.

That spending is reverberating across the global economy and raising the cost of borrowing in the U.S.

In the past, Gulf oil exporters were among the biggest and most reliable buyers of U.S. government debt.

Gulf purchases may have shaved as much as 0.25 percentage point off U.S. borrowing costs. Between 2005 and 2023, that saved U.S. taxpayers an estimated $700 billion — equivalent to the annual GDP of the state of Michigan.

But the Gulf’s lavish domestic spending means these purchases are no longer guaranteed. If U.S. interest rates rise again, don’t just look at Powell and the Fed — watch shrinking petrodollar savings and Gulf domestic spending, too.