Who is afraid of Mideast money?

With their huge windfall, the Arab is buying the world. The men who manage the region's sovereign wealth funds are using the billions from Persian Gulf oil revenues to change the face of global finance.

Six Gulf states—Abu Dhabi, Dubai, Kuwait, Oman, Qatar, and Saudi Arabia—account for nearly half of the world's sovereign wealth fund assets. They control some $1.7 trillion, as much as all of the hedge funds in the world and more than the $1 trillion private equity industry—and Morgan Stanley predicts the total will grow by about $400 billion annually over the next several years. There's even talk that Saudi Arabia may soon unleash a new $500 billion-plus fund. Bankers estimate that Gulf funds earned about $180 billion from their sovereign wealth fund investments in 2007—more than half of the $315 billion they collected in oil and gas revenues.

It wouldn't be so worrisome but for the fact that these massive funds are situated in a handful of tiny, oil-rich city-states in one of the world's most volatile regions. The tiny Gulf emirates rely on the U.S. military for protection from the likes of Iran and Iraq—and they rely on guest workers for much of their labor. It's a precarious situation, to say the least.