Gulf economies face long-term hit from Iran conflict

Persian Gulf economies will face a sustained drag on growth even if the Iran war ends in the coming weeks, an Institute of International Finance analysis cited by BBC concludes. The report estimates real GDP growth across the six Gulf Cooperation Council states could be 1.2 to 2 percentage points lower over the next three years because of disrupted shipping, deferred mega-projects and elevated insurance costs.

The Strait of Hormuz, through which roughly a fifth of seaborne oil moves, has seen daily tanker traffic fall about 25% since the conflict escalated, while Lloyd's of London has classified the region as 'high-additional-risk' for insurers. Saudi Arabia's Public Investment Fund and the UAE's Mubadala have paused several non-essential project decisions, BBC reported, while Qatar and Oman have continued LNG and copper investments respectively.

The IIF cautioned that GCC sovereign borrowing costs could climb if the conflict drags on past summer, particularly for Bahrain and Oman. Saudi Arabia retains a strong fiscal buffer and may absorb the shock more easily, but its Vision 2030 spending plan now faces tougher prioritisation. Oil prices remain a wild card: another spike could offset some of the growth hit through higher hydrocarbon receipts.