Gulf Economies Face Severe War Fallout

Gulf Cooperation Council (GCC) states are experiencing significant economic disruption and financial strain following Iranian strikes that began on March 1, 2026, in retaliation for a U.S.-Israeli war against Iran. This conflict has severely impacted critical economic sectors, including oil exports, aviation, and fertilizer production, leading to substantial financial losses and global supply chain disruptions.

The Strait of Hormuz, a vital global chokepoint handling approximately 20 million barrels per day (bpd) of oil, has seen export volumes plummet to less than 10% of pre-conflict levels. This blockade has particularly affected Iraq, which has a limited six-day crude oil storage capacity and has been forced to cut production from 3.3 million bpd to 1.3 million bpd.

Qatar and Kuwait have declared “force majeure” on energy contracts. Iranian attacks have targeted energy facilities (40%), military sites (35%), and civilian infrastructure (25%) in Qatar, according to its Prime Minister.

Background

The aviation and tourism sectors are also heavily impacted, with an estimated 40,000 flights canceled due to airspace closures. Furthermore, the cost of air defense for GCC states is significantly higher than Iran's expenditure on attacks.

The UAE has spent an estimated $1.31 billion to $2.61 billion on air defense, up to 13 times Iran's estimated $194 million to $391 million cost for its strikes. Kuwait and Qatar have spent hundreds of millions on defense.

The conflict has also triggered a looming global agricultural crisis, as QatarEnergy's fertilizer arm halted urea production, causing Egyptian urea prices to surge by 37% in days.