World oil has peaked and Brent blend crude will average around $60 a barrel in 2007, compared with almost $65 a barrel last year. Iran and other potential flashpoints could produce spikes, but the consensus is prices will fall to about $53 a barrel in 2010.

But a new wall of money is heading to the Gulf. Despite lower oil prices, the six GCC states will probably generate more than $600,000 million in current account surpluses in 2007-11, compared with more than $500,000 million in 2002-06.

The consequences are increasingly obvious. Gulf investors are building their portfolio of international investments, including the $600 million Qatari Diar Real Estate Investment Company purchase of London’s Chelsea Barracks. Reports that they may be behind a possible $45,000 million private equity bid for Dow Chemical look credible. There have been dozens of smaller deals and others that are not publicised.

Gulf business is in the headlines again. More than 30 years after the first oil boom, the region’s corporations dominate some global markets. Saudi Aramco is the world’s most valuable corporation. Saudi Basic Industries Corporation (Sabic) is one of the five biggest bulk petrochemicals producers and could be the largest in 10 years.

In 2006, subsidiaries of Qatar Petroleum became the world’s leading suppliers of liquefied natural gas. In aviation, Gulf airlines are among the fastest-growing on earth.

The GCC economic boom is helping to create great corporations in oil, gas, petrochemicals, aluminium and aviation. But there is an intriguing gap. The GCC has not managed to develop a bank consistent with its financial strength. At the end of 2006, The National Commercial Bank of Saudi Arabia was the region’s biggest, with a balance sheet of $40,000 million. Citibank, the world’s leading financial institution, then had assets 30 times larger, at $1.5 trillion.

Why do Gulf banks punch below the region’s weight? One reason is that Gulf governments avoid local banks and invest directly in international markets. The Abu Dhabi Investment Authority has assets approaching $400,000 million. Its counterparts in Kuwait and Saudi Arabia have assets greater than $100,000 million each. Gulf banks play a modest role in investing this money.

Past experiences have been discouraging. In the 1970s, the Gulf backed new banks that aimed to be among the biggest. These hopes died as they experienced difficulties caused by the 1986 oil price crash. The closure of Bank of Credit & Commerce International in 1991 extinguished what was left of the dream. Gulf banks have since concentrated on domestic and regional markets.

Growth by domestic consolidation has also not occurred. In Saudi Arabia, the sole bank merger was in 1999, when what is now Samba Financial Group acquired United Saudi Bank. In 2000, Al-Ahli Commercial Bank of Bahrain merged with the London-consortium United Bank of Kuwait in a deal backed by Kuwaiti investors. Three mergers in Oman produced BankMuscat, the sultanate’s largest bank. In the UAE, government-supported mergers among small banks created the Emirates Bank Group in Dubai and Abu Dhabi Commercial Bank in the mid-1980s. There have been none since.

The case for GCC bank consolidation, however, has always looked good. Regulatory constraints, resistance from management of potential takeover targets and shareholder conservatism have obstructed what some see as a natural and beneficial process.

The need for larger Gulf banks is intensifying as the scale of projects in the region grows. Some are too big for local and regional banks. As a result, international banking firms are winning a growing share of GCC project financing and, with it, the associated fee income and corporate business.

But a new era may be starting after the proposed merger between National Bank of Dubai and Emirates Bank Group. The plan looks serious and Goldman Sachs has been appointed