If the conflict involving Iran is not resolved quickly, major Gulf economies including Saudi Arabia, the UAE, and Qatar could suffer severe damage. According to Farouk Soussa, an economist at Goldman Sachs, should hostilities continue through April and the Strait of Hormuz remain blocked for two months, Qatar and Kuwait could see their GDP contract by 14% this year. This would mark the worst economic downturn for both nations since the early 1990s—when Iraq’s invasion of Kuwait triggered the Gulf War and sent global oil markets into turmoil.

Saudi Arabia and the UAE are expected to fare somewhat better, as they possess the ability to reroute oil shipments away from the critical Strait of Hormuz. Even so, their GDPs are projected to decline by approximately 3% and 5%, respectively, which would represent the most severe economic shock since the COVID-19 pandemic in 2020.

Soussa, Goldman Sachs’ economist for the Middle East and North Africa, stated, "For most Gulf economies, the short-term impact of this conflict could exceed that of the pandemic. Once the dust settles, they will be able to rebuild and recover, but the lasting damage to market confidence remains to be seen."

This assessment underscores the dual pressure facing Gulf Arab states as a result of the Middle East conflict: both oil and non-oil sectors are under strain. The conflict has entered its third week with no signs of easing, as Iran continues to strike regional targets in retaliation for U.S. and Israeli airstrikes. Over the weekend, U.S. forces attacked military facilities on Iran’s key oil export hub, Kharg Island, and warned that if Iran continues to disrupt shipping through the Strait of Hormuz, its energy infrastructure could be targeted.

Approximately one-fifth of global oil exports pass through the Strait of Hormuz. Due to the strait’s closure and production disruptions in countries such as Saudi Arabia and the UAE, Brent crude has surged above $104 per barrel. Qatar’s liquefied natural gas exports have dropped significantly, impacting global gas markets, while Bahrain has begun cutting output at the world’s largest aluminum smelter due to the Strait of Hormuz blockade.

Soussa believes that if supply chain disruptions persist, oil-dependent economies such as Qatar, Kuwait, and Bahrain will be hit hardest. Other economists, including Mohamed Abu Basha of EFG Hermes and Justin Alexander of Khalij Economics, note that the situations in Saudi Arabia and the UAE are more complex: both countries can export crude via alternative routes, and rising oil prices may provide some fiscal cushion.

In the non-oil sector, Gulf countries could face broader repercussions, as industries ranging from real estate to tourism and investment are affected. Among six economists interviewed, all agreed that if the conflict prolongs, Saudi Arabia is likely to demonstrate the greatest resilience. The kingdom has successfully defended against most Iranian attacks, with its airspace and commercial activity largely remaining open and experiencing only limited disruption.

Monica Malik of Abu Dhabi Commercial Bank and Azad Zangana of Oxford Economics pointed out that if the current situation continues, Saudi Arabia’s main near-term risk would be a widening fiscal deficit in the first quarter due to declining revenues. However, most economists indicated that if oil prices and exports remain elevated, Saudi Arabia’s fiscal deficit in 2026 could actually be smaller than pre-conflict projections, outperforming expectations.

According to calculations by Tim Callen, a visiting scholar at the Arab Gulf States Institute in Washington, if Saudi Arabia maintains crude production at around 7.5 million barrels per day and Brent crude stays in the $90 range, its annual fiscal deficit could narrow by one percentage point. The Saudi government previously projected a 2026 fiscal deficit of 3.3%.

Elsewhere, EFG Hermes’ Abu Basha expects the UAE to still achieve a fiscal surplus this year, while Qatar’s deficit may widen. Gulf nations are likely to continue issuing debt to alleviate fiscal pressures. Fady Gendy, a portfolio manager at Arqaam Capital, noted that bond market investors have so far shown little concern about the conflict’s impact on regional finances. He added, "If the conflict drags on, market worries could emerge, but that is not the prevailing expectation at the moment."