A recent United Nations study indicates that a war involving the United States and Israel against Iran could result in nearly $200 billion in lost economic growth for the Middle East. According to an analysis of the economic and social impacts on Arab countries released by the United Nations Development Programme (UNDP) early Tuesday, disruptions caused by the conflict could lead to GDP losses for Arab states ranging from $120 billion to $194 billion.
The agency stated it examined various scenarios to assess how the conflict, which began on February 28, would affect nations across the region. The report noted that even a swift conclusion to the war could result in significant losses. A brief military escalation in the Middle East could trigger profound and widespread socio-economic repercussions throughout Arab nations.
The report stated that the overall losses could cause the region's unemployment rate to rise by up to 4 percentage points, resulting in the loss of approximately 3.6 million jobs and potentially pushing as many as 4 million people into poverty.
Abdallah Al Dardari, UN Assistant Secretary-General and Director of the UNDP Regional Bureau for Arab States, stated in a declaration, "This crisis has already served as a wake-up call for countries in the region."
The most severe impacts are expected to be concentrated in Gulf Cooperation Council (GCC) countries and the Levant region, where GDP declines in both areas could exceed 5.2%. Nations such as Qatar, Kuwait, Saudi Arabia, and the United Arab Emirates are facing the impact of a "de facto closure" of the Strait of Hormuz, severely hindering their substantial oil and gas exports.
Goldman Sachs Group estimates that if the conflict persists until the end of April, Qatar and Kuwait could each see their GDP contract by 14% this year. This would represent the most severe economic recession for both countries since the early 1990s, when the Iraqi invasion of Kuwait triggered the Gulf War.
Saudi Arabia and the UAE are in a somewhat better position due to their ability to reroute some oil shipments away from the Strait of Hormuz. However, their GDPs could still decline by approximately 3% and 5% respectively, marking the largest economic shock for both since the COVID-19 pandemic in 2020.
The conflict, now in its second month, has already driven a surge in global energy prices, unsettling the world economy. A previous UN report highlighted that the "de facto closure" of the Strait of Hormuz is pushing up prices for food and fertilizers, with particularly severe consequences for poorer nations.
Fitch Ratings stated on Monday that since the war began, spreads on US dollar-denominated sukuk and conventional bonds from Gulf states have widened to five-year highs, reflecting a deterioration in global investor risk perception. Over the month ending March 27, the yield on the S&P MENA Sukuk Index rose by 69 basis points to 5.15%; the yield on a similar conventional bond index increased by 64 basis points to 5.37%.
This level of volatility exceeds the market fluctuations seen after the announcement of US tariff policies in April 2025 and following strikes on Iran in June 2025, but remains below the levels witnessed during the pandemic period.
Gulf states, as significant emerging market borrowers, rely heavily on debt to finance economic diversification projects aimed at reducing their dependence on oil. Fitch data shows that the region's outstanding public debt reached $1.2 trillion in March, a 14% year-on-year increase; syndicated loan balances grew by 12% year-on-year to $450.5 billion.
Simultaneously, a separate UNDP analysis released on Tuesday indicated that the war would trigger a sharp contraction in Iran's economy, with GDP potentially falling by up to 10.4%, and could push over 3.5 million Iranians into poverty. The report stated that airstrikes on Iran have damaged residential buildings, schools, healthcare facilities, and critical public services.
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