Gulf War Disruptions Threaten Energy Trade and Regional Growth

Military tensions involving Iran are disrupting economic activity across the Persian Gulf, threatening energy exports, investment and international business events. Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Kuwait face mounting pressure as shipping security concerns and damaged infrastructure complicate regional trade and economic recovery.

The conflict has forced companies and governments to reconsider their operations. Saudi Arabia's Riyadh Air has transported international passengers to an alternative airport approximately four and a half hours from its main hub after strikes damaged the original facility.

Saudi Arabia has also postponed its flagship Future Investment Initiative conference until next year. Meanwhile, attacks have targeted the headquarters of state-owned oil company Saudi Aramco and a critical pipeline, while commercial vessels continue to face missile and drone threats in the Strait of Hormuz, according to The New York Times.

The International Monetary Fund estimates that economic growth across the Gulf Cooperation Council will decline by 5 percent in 2026. Kuwait, Bahrain and Qatar face particularly severe contractions because their energy exports depend heavily on the Strait of Hormuz.

However, the broader Middle East and North Africa region has demonstrated greater resilience than initially anticipated. In its latest Regional Economic Outlook, the IMF projects a 1.3 percent contraction in regional output during 2026, representing a downward revision of 2.7 percentage points from its April forecast.

Jihad Azour, director of the IMF's Middle East and Central Asia Department, said economic adjustments and existing policy safeguards had helped countries absorb the initial shock.

Eight months after hostilities erupted in the Gulf, economic activity has slowed considerably in some countries but has not collapsed. Major oil-importing economies, including Egypt, Jordan and Morocco, are expected to achieve growth exceeding 4 percent this year.

Remittances, tourism, investment and favorable financial conditions have supported these economies. Nevertheless, inflation could decline more slowly than previously expected, particularly as food and energy costs remain elevated.

Azour highlighted the importance of financial preparedness during the IMF-World Bank Annual Meetings in Bangkok, where policymakers discussed the region's ability to withstand continuing economic shocks.

One finance minister emphasized the importance of maintaining economic safeguards before crises emerge.

"The policy frameworks and buffers built in good times decide how much room we have in the bad times."

Azour also warned that prolonged disruptions could intensify energy price volatility, weaken investment and tourism, and increase financial pressure on low-income countries. Reduced international aid and high household food expenses leave vulnerable economies with fewer resources to absorb additional shocks.

Despite the security concerns, several major business gatherings have continued across the Gulf. Following the cancellation of the Riyadh investment conference, Bahrain hosted the Manama Dialogue and Gateway Gulf, while Abu Dhabi held the ADIPEC energy conference. Dubai and Doha also hosted financial and property industry events.

Attendance at these gatherings was generally strong, although security concerns affected participation by some major international executives. Darren Woods, chief executive of ExxonMobil, did not attend ADIPEC, according to The New York Times.

Organizers of ADIPEC stated that high-level participation remained strong but did not explain Woods's absence. Other prominent energy executives, including BP's Meg O'Neill, Oxy's Richard Jackson, Vitol's Russell Hardy and Equinor's Anders Opedal, attended the Abu Dhabi gathering.

During the Manama Dialogue, Anwar Gargash, diplomatic adviser to the UAE president, expressed concern about another escalation and called for diplomatic engagement.

"We don’t really want to see another round of confrontation in the region. We want to see a diplomatic and political resolution of this protracted crisis that we have seen. [But] we are … braced for the worst."

Gargash also acknowledged that individual Gulf countries had demonstrated their ability to withstand Iranian attacks but questioned the effectiveness of regional cooperation.

"We have not collectively risen to the challenge. The confidence in our collective ability to stand to a challenge of this size has been undermined and it has in many cases unfortunately proven to be hollow," Gargash said.

Separately, Suhail Mohamed Al Mazrouei, the UAE's minister of energy and infrastructure, announced plans for energy investment of up to $55 billion through 2030.

He said the country intended to strengthen its security preparations in response to the conflict and the possibility of further attacks.

"I can tell you one thing: we cannot predict what is going to happen but … we will be much more prepared than we were before. We are not going to be satisfied with the normal measures like two or three layers of protection," Mazrouei said.

Energy export figures nevertheless indicate that regional trade has partially recovered. According to maritime intelligence group Kpler, the seven-day average of crude exports through the Strait of Hormuz, the Red Sea and Oman had occasionally exceeded prewar levels.

However, combined exports through these three routes fell to 20.1 million barrels during the seven days ending October 28, approximately 3.2 million barrels below their prewar level. Traffic through the Strait of Hormuz alone reached 12.7 million barrels, equivalent to 74 percent of its prewar baseline.

These figures exclude additional exports transported through Saudi Arabia's East-West pipeline and ports along the Arabian Sea, including Fujairah. Their exclusion means the reported maritime figures do not represent the region's entire oil export capacity.

Azour identified economic diversification, stronger infrastructure and deeper regional integration as important measures for reducing exposure to future disruptions. He also highlighted renewable energy, digital infrastructure and artificial intelligence as potential sources of broader economic growth.