1 trillion dollars in economic losses for Persian Gulf countries from the US-Israel war against Iran
Countries of the Persian Gulf are being called upon to pay a heavy economic price from the US-Israel war against Iran, as direct material damages exceed 200 billion dollars, while losses in economic growth are estimated to reach 790 billion dollars by 2030. According to a report by Allianz Trade, the devastating economic impacts of the conflict are now forcing Washington's Arab allies in the region to tap into their sovereign wealth funds, while simultaneously scaling back the ambition and scope of their major development plans. The total impact from physical destruction and the loss of economic activity approaches 1 trillion dollars, with energy infrastructure, tourism, the real estate market, and regional trade ranking among the sectors suffering the heaviest blows.
790 billion dollars in economic output losses by 2030
More than 200 billion dollars in material damages have already been recorded across the broader region, with the greatest impacts identified in economies affected by restrictions on navigation through the Strait of Hormuz. However, the true economic cost of the conflict is not limited to immediate destruction. The report estimates that Persian Gulf economies will cumulatively lose 790 billion dollars in economic output during the 2026-2030 period, compared to growth forecasts formulated prior to the war. This amount corresponds to 5.9% of the total GDP of the region's countries over the five-year period. This represents a particularly significant blow to economies that have strategically invested in diversifying their production models, seeking to reduce their dependence on hydrocarbon revenues.
Arab countries turn to sovereign wealth funds
In order to curb the economic consequences of the war, Persian Gulf states are expected to channel approximately 120 billion dollars from their sovereign wealth funds into domestic investments by 2030. This specific strategy, however, will limit the resources available for investments abroad. At the same time, surplus revenues from trade and investments in foreign assets are estimated to decline by 50%. The military conflict is also forcing governments in the region to reconsider their development priorities, shifting spending away from ambitious mega-projects toward economic resilience, domestic infrastructure, and military spending. The latter is expected to reach 380-400 billion dollars by 2030, potentially creating investment opportunities of roughly 160 billion dollars for the private sector and foreign investors.
Saudi Aramco profits, yet Saudi Arabia's prospects worsen
Despite broader economic losses in the region, Saudi Aramco announced a 34.6% increase in third-quarter net profits, benefiting from higher oil prices. This development is recorded despite restrictions affecting access to the Strait of Hormuz and Bab al-Mandab. However, the International Monetary Fund (IMF) has downgraded its forecasts for Saudi Arabia, estimating that its economy will contract by 3.3% this year. The new projection is five percentage points lower than the estimate published by the Fund in July. In October, Jihad Azour, director of the IMF's Middle East and Central Asia Department, warned that the oil-producing economies of the Persian Gulf will struggle to return to their pre-war growth trajectories in the medium term. As he pointed out, the conflict has caused long-lasting damage across multiple sectors of economic activity.
Energy reserves and alternative transport routes are running out
Initially, economies in the region attempted to contain turmoil in energy markets by utilizing strategic reserves, stored fuels, alternative suppliers, and different maritime transport routes. However, these available safety margins are now approaching their limits. Both the Allianz Trade report and IMF estimates converge on the conclusion that the duration of the military conflict will constitute the decisive factor for the final economic cost. A prolonged war threatens to widen financial losses, delay development programs, and undermine the long-term ambitions of Persian Gulf countries to diversify their economies.
The naval blockade and Iran's retaliation
In April, Washington imposed a naval blockade, following the offensive action by the US and Israel against Iran, which began on February 28. Tehran responded with successive waves of missile strikes and unmanned aerial vehicle (drone) attacks against Israeli-occupied territories, as well as American bases and interests across the entire region. Simultaneously, it imposed restrictions on the passage of American vessels and vessels belonging to US allies through the strategically important Strait of Hormuz. This development caused severe disruption to global energy supplies, leading to a surge in oil and fuel prices, particularly in the United States. In an effort to alleviate supply pressures, Washington and the International Energy Agency (IEA) have since repeatedly proceeded with the release of strategic oil reserves.
Relations between Arab states and the US in the spotlight
The role of Persian Gulf Arab governments in the war is now under growing scrutiny, primarily due to their long-standing military and defense partnerships with Washington, as well as their hosting of major US military installations in the region. Specifically: Bahrain hosts the 5th Fleet of the US Navy. Qatar hosts the strategically crucial Al Udeid air base. Kuwait, Saudi Arabia, and the United Arab Emirates also maintain extensive military cooperation with Washington. These specific facilities secure a strong US military presence in Western Asia, placing governments in the region at the epicenter of the offensive military campaign against Iran. At the same time, questions have emerged regarding the extent to which certain Persian Gulf governments encouraged Washington to initiate the war against Tehran and subsequently facilitated its continuation. According to a Reuters report in March, certain Persian Gulf governments were exerting pressure on Washington to continue weakening Iran's military capabilities, rather than ending the war without addressing what they considered Tehran's regional military influence. These reports intensified scrutiny of the political choices of governments that, while publicly stating they seek regional stability, continue to rely on American military protection. Information has also been made public regarding the provision of regional logistical and military support for American strikes, as well as participation in the military operation or its facilitation through strategic partnerships.
Tehran's warning and the cost of American bases
Iran has repeatedly warned that countries allowing the use of their territories, military facilities, or resources for attacks against it will be held responsible for their participation. Iranian officials argue that the presence of US military bases across the entire region has turned neighboring countries into potential staging grounds for military operations against Iran, thereby exposing them to the risk of Iranian retaliation. Iranian attacks against American targets caused damage to military bases and more than 80 energy facilities, primarily in Kuwait, Qatar, and Bahrain. Approximately one-third of the facilities struck sustained severe damage. The destruction of energy infrastructure, disruptions to maritime trade, declining investor confidence, and rising reconstruction costs now raise serious questions regarding the long-term consequences of hosting foreign military forces. At the same time, the issue of aligning regional defense and strategic choices with Washington's military policy is returning to the forefront, as the economic price of the war is proving particularly high for the very countries hosting American military installations.
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