According to Goldman Sachs Group, the largest economies in the Gulf region—including Saudi Arabia, the United Arab Emirates, and Qatar—could face severe economic damage if the outcome of the Iran conflict remains unresolved for an extended period.
Farouk Soussa, an economist at Goldman Sachs, stated that if the conflict persists through April and results in a two-month disruption of shipping through the Strait of Hormuz, Qatar and Kuwait could each see their GDP contract by 14% this year.
This would mark the most severe economic downturn for these nations since the early 1990s, when Iraq's invasion of Kuwait triggered the Gulf War and caused significant turmoil in global oil markets.
Saudi Arabia and the UAE are in a relatively better position, as both countries have the capacity to export crude oil via alternative routes, bypassing the Strait of Hormuz. However, Soussa projects that their GDP could still decline by approximately 3% and 5%, respectively, representing the most substantial economic shock since the COVID-19 pandemic in 2020.
"For many Gulf economies, this conflict could have a greater short-term impact than the pandemic," said Soussa, who oversees the Middle East and North Africa region. "Once the dust settles, they will rebuild and recover, but the depth of the confidence-related scars left by this conflict remains to be seen."
This assessment underscores that the Middle East conflict presents a near "nightmare" scenario for Arab Gulf states: both the oil and non-oil sectors could suffer simultaneously, creating a "double shock."
As the conflict enters its third week, there are no signs of de-escalation. Iran continues to carry out strikes against neighboring countries in retaliation for U.S. and Israeli bombings. Dubai International Airport temporarily suspended flights following a fire caused by a drone incident, while Saudi Arabia intercepted more than a dozen drones overnight.
A senior adviser to U.S. President Donald Trump revealed that the Pentagon estimates the Iran conflict, now in its third week, could last four to six weeks.
Amid shipping disruptions in the Strait of Hormuz and constrained crude supplies in countries such as Saudi Arabia and the UAE, Brent crude continued to rise on Monday, surpassing $104 per barrel. Over the past two weeks, oil futures have surged by more than 40%.
On Monday, oil prices exceeded $104 per barrel due to the halt in shipping through the Strait of Hormuz and the shutdown of oil production in countries including Saudi Arabia and the UAE. Over the past two weeks, oil futures have increased by more than 40%.
In the non-oil sector, Gulf countries may face broader economic repercussions—impacting everything from real estate and tourism to investment activity.
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