The latest developments began with a stark warning that leaves no room for complacency. The United Nations Economic and Social Commission for Western Asia estimated that the ongoing war has already inflicted initial losses of approximately $63 billion on the Arab region within just two weeks, equivalent to 1.6% of the regional GDP. The report warns that if the conflict continues for a full month, losses could rise to nearly $150 billion, or 3.7% of the regional economy.
What makes these figures particularly alarming is not only their scale, but the nature of the shock itself. The impact is no longer confined to battlefields. It has extended deeply into energy, trade, aviation, and financial markets. The war has effectively become a multi-layered economic earthquake, with repercussions that extend far beyond the borders of the countries directly involved.
These numbers signal a deeper structural vulnerability. The region is not merely absorbing the cost of war in the traditional sense. Instead, it is experiencing a disruption in the very foundations of its modern economy, including vital maritime corridors, oil and gas exports, and heavy reliance on imported food. The report does not simply quantify current losses. It exposes how fragile the region becomes when geopolitical forces override economic stability.
The Gulf at the Centre of the Storm
The ESCWA report highlights that Gulf Cooperation Council countries bear the largest share of direct financial losses. At first glance, this may appear contradictory, given that these nations are among the wealthiest and most resource-rich in the region. However, the Gulf is not just a producer of oil and gas. It is a global energy hub and a central node for shipping, ports, and services. Any disruption to this network immediately impacts stock markets, insurance systems, and investor confidence.
The situation becomes even more critical when examining the world’s most sensitive maritime passage. According to ESCWA, shipping traffic through the Strait of Hormuz has dropped by as much as 97 percent, falling from 137 vessels per day to just 5. This has disrupted goods flows valued at $2.4 billion daily and driven trade losses during the first two weeks to approximately $30 billion.
These figures represent more than a temporary slowdown. They reflect a near-total disruption of one of the world’s most critical economic arteries, through which a significant portion of global oil, gas, and trade passes. When this artery is constricted, the consequences extend far beyond the Gulf. The question shifts from regional losses to the global cost of prolonged disruption.
On the ground, the fragility of this infrastructure has become evident through the expansion of strikes targeting oil and gas facilities across the Gulf. According to Reuters, facilities in Saudi Arabia, Kuwait, Qatar, the UAE, and Bahrain have been hit or disrupted. These attacks have affected refineries, gas plants, and export terminals. The CEO of QatarEnergy confirmed that Iranian strikes disrupted one sixth of Qatar’s liquefied natural gas export capacity. This capacity is valued at approximately $20 billion annually and may take between three to five years to fully restore.
This highlights a deeper dilemma. The Arab region is not only losing current revenues. It risks losing future production capacity, export potential, and long-term investor confidence.
When War Moves from Battlefields to Prices, Jobs, and Airports
The economic impact of war does not follow a single trajectory. While it begins with energy, it rapidly spreads across multiple sectors. The report outlines a sharp decline in oil production in affected countries, estimated at 20 million barrels per day during the first two weeks due to logistical paralysis. At the same time, liquefied natural gas supplies, particularly from Qatar which accounts for 19 percent of global demand, have been disrupted, contributing to a significant surge in gas prices across Europe.
In parallel, the aviation sector has suffered severe setbacks. More than 18,400 flights were cancelled across nine major regional airports within 12 days. Initial losses for airlines have been estimated by ESCWA at $1.9 billion, with the potential to rise if the conflict continues.
This cascading effect is dismantling sectors that many Arab economies have relied upon for diversification, including tourism, aviation, services, trade, and non-oil industries. ESCWA warns that under one of its reference scenarios, a 30-day continuation of the war would lead to rising inflation and a slowdown in non-oil sectors in the Gulf. Meanwhile, energy-importing Arab economies would face higher fuel costs and intensified fiscal pressures.
In practical terms, even oil-exporting countries may not benefit from rising prices if exports are disrupted or if insurance, shipping, and security costs surge. Energy-importing countries, on the other hand, face a compounded crisis driven by both price increases and widening fiscal deficits.
A Deepening Economic Divide Across the Arab World
Perhaps the most dangerous outcome is the re-emergence of a sharp economic divide within the Arab world. Gulf countries are absorbing losses in infrastructure, trade, and investment. Meanwhile, lower-income Arab states are bearing the burden through rising food prices, fuel costs, and reduced financial support.
The International Monetary Fund has warned that sustained increases in energy prices could drive global inflation higher while slowing economic growth. At the same time, disruptions to fertilizer and industrial exports from the Middle East threaten to push global food prices upward, disproportionately affecting poorer societies.
In this environment, the ordinary citizen becomes the weakest link. Food becomes more expensive, employment opportunities decline, and governments face reduced capacity to provide support.
The End of War and the Lasting Cost
Three primary scenarios emerge when considering the potential trajectory of the conflict.
The first, and least severe, involves a rapid end to the war through a political agreement or a fragile ceasefire. In this case, major losses could be contained, and energy and shipping activities would gradually recover. However, the effects would not disappear immediately. Insurance costs would remain elevated, markets would remain cautious, and damaged infrastructure could take months or even years to fully recover.
The second scenario involves a prolonged but controlled conflict, with continued exchanges of strikes without escalating into a full regional war. In this situation, middle and lower-income populations would feel the impact most acutely, as governments struggle to balance social spending with fiscal stability.
The third and most dangerous scenario is a broader regional escalation. This would involve expanded strikes on infrastructure and maritime routes, leading to a fundamental reshaping of the region’s economic map. Ports could lose competitiveness, markets could lose investor trust, and populations would bear the cost of a war beyond their control.
In such a scenario, the central question for the average citizen would no longer be who wins the war, but why the cost of bread, fuel, and daily life continues to rise. The ESCWA report makes this reality clear. The war on Iran is not merely a military development. It is an early warning that the entire Arab economic system may be entering a critical phase, with ordinary people ultimately paying the highest price.
