The conflict that spread in the Middle East after the Israeli-American strikes against Iran is no longer confined to destruction, response and military record. It is also now measured at the scale of a regional economic shock of exceptional magnitude. On Tuesday, in Amman, Abdallah Al Dardari, United Nations Under-Secretary-General and UNDP Regional Director for the Arab States, estimated that Arab economies could lose between $120 billion and $194 billion if the current escalation continued over four weeks, a contraction of 3.7 per cent to 6 per cent of regional GDP. The figure of $186 billion, advanced in this context, gives the measure of the changeover: in a month of war, more than one year of regional growth could be erased.
This estimate does not refer to an isolated theoretical loss on a single country, nor to a cost of reconstruction limited to some destroyed infrastructure. It aggregates a global shock on trade, production, employment, transport, energy, investment and confidence. The UNDP diagnosis is clear: military escalation exposes the structural vulnerabilities of the Arab region, to the point that a relatively short conflict can cause profound and lasting macroeconomic effects. To this is added another warning: up to 3.64 million jobs could disappear, while nearly 4 million people are at risk of falling into poverty. War therefore does not damage only the directly targeted States. It deregulates an entire economic space, already traversed by very strong energy, logistical and budgetary dependencies.
The most striking factor in this new assessment is the profile of the most exposed countries. Contrary to the idea that large oil exporters would naturally be protected by rising oil prices, UNDP believes that the largest macroeconomic losses are concentrated precisely in the Gulf and the Levant. The Gulf Cooperation Council countries could suffer a loss of between $103 billion and $168 billion, ranging from 5.2 per cent to 8.5 per cent of GDP. The Levant would follow with a shortfall of $17.3 billion to $28.9 billion, or 5.2 per cent to 8.7 per cent of GDP. The shock wave is therefore both rich in absolute and brutal value in relative intensity. It affects the financial core of the Arab world as well as its most fragile economies.
A cost that already exceeds one year of growth
The central point of the UN announcement is not only the amount. It is the fact that this loss would erase more than the cumulative growth recorded in 2025 in the Arab region. This formulation, used by UNDP, shows that it is not simply a cyclical slowdown. The current escalation cancels recent gains that had called for months of recovery, fiscal adjustment, market standardization and re-starting of several sectors. In a few weeks, the war can thus reverse a regional dynamic that still recently seemed to be oriented towards gradual improvement.
This breakdown is particularly evident in the Gulf economies. The large oil monarchies certainly have financial reserves, massive sovereign funds and a high debt capacity. But their exposure to global trade, energy, aviation, logistics chains and financial markets also makes them very sensitive to a protracted regional crisis. UNDP emphasizes that macroeconomic losses are caused by trade disruptions and volatile energy markets. In short, the financial power of the Gulf does not shelter it from a conflict that blocks shipping routes, increases insurance, disrupts crude oil flows, slows down tourism, undermines investor confidence and weakens supply chains.
In the Levant, the logic is different but equally disturbing. Iraq, Jordan, Lebanon, Palestine and Syria have a much higher social vulnerability. UNDP estimates that more than 75 per cent of the regional increase in poverty would occur in that subregion. Between 2.85 and 3.29 million more people could fall below the poverty line. This means that the economic bill is not limited to columns of GDP. It translates into amputated consumption, interrupted incomes, overstretched social nets and already insufficient fiscal absorption capacity. In several countries in the Levant, a new regional tremor strikes economies that are barely emerging from long crises or have never really emerged.
Why Arab countries pay so heavily
The apparent paradox of this crisis is that several Arab countries bear a huge bill even though they are not at the origin of the initial offensive. The explanation is economic before being political. The Arab economies are linked to each other and to the rest of the world through rapid transmission channels: hydrocarbons, maritime transport, aviation, tourism, food trade, cross-border finance, transfers, BTP, logistics and security of energy routes. When a conflict reaches the Gulf, the Levant and the outskirts of the Strait of Ormuz, it not only causes targeted strikes. It almost immediately increased the cost of insurance, disrupted deliveries, disrupted ports, delayed investments and frozen major economic decisions.
UNDP further notes that its evaluation is based on a computable general equilibrium model that measures several simultaneous channels: increased commercial costs, temporary productivity losses and localized capital destruction. This method allows us to grasp the effect of a conflict not only where bombs fall, but also in areas where activity slows down because flows become more expensive, more risky or slower. This explains why a country with little physical damage can nevertheless suffer significant economic losses if its growth depends on a stable regional environment.
The Gulf States are a perfect example of this mechanism. Iran’s retaliation strikes, the questioning of energy security and uncertainties on export routes have already shaken what remains of the implicit pact between oil rent, trade stability and geopolitical protection. Reuters pointed out in recent days that the war shook the foundations of the petrodollar system and raised doubts in the Gulf about the strength of the American security umbrella. In other words, conflict also acts as a shock of confidence. It encourages public and private actors to reconsider their risks, investments, alliances and growth projections.
The biggest losses in the Gulf
The figures presented by UNDP are unambiguous: the Gulf Cooperation Council concentrates most of the losses in absolute terms. With a range of 103 to 168 billion dollars of GDP lost, it is he who bears the heaviest bill. This reality deserves to be stressed, as it contradicts too fast a reading that oil exporters would benefit mechanically from rising prices. In times of regional war, a more expensive barrel does not necessarily compensate for the paralysis of roads, the drop in air traffic, temporary stoppages of production, the extra cost of risk premiums, the targeted destruction of infrastructure and the evaporation of entire sections of tourism and consumption.
The Gulf region is largely able to project the image of a safe, fast and connected hub to the world. As soon as this promise crumbles, the effects multiply. Airlines are reconfiguring their routes. Investors suspend certain transactions. Cargo’s getting late. Shipowners reassess their routes. Companies increase their coverage costs. States need to spend more to protect infrastructure and reassure markets. War therefore acts as a brutal tax on the entire regional economic model.
The Gulf pays even more as its exposure is global. A disturbance in this area is never limited to the immediate vicinity. It affects energy prices, Asian supply, international finance, freight markets and general perception of risk. That is why Abdallah Al Dardari’s warning goes beyond the Arab region itself. When he called for a speedy cessation of hostilities, he did not only talk about Arab budgets. He also talks about a shock that threatens global growth and the balance of value chains.
The Levant at the edge of a new social breakdown
While the Gulf bears most of the loss in absolute value, the Levant is probably the area where the social effects appear most dangerous. The economies of this subregion have much weaker budgetary margins, more fragile social systems and, for many, a productive fabric already damaged by years of crisis. UNDP anticipates a decline in GDP in the Levant from 5.2 per cent to 8.7 per cent, as well as a rise in poverty from 4.45% to 5.15%. This increase would result in an additional 2.85 to 3.29 million people falling into poverty.
Again, the issue is not limited to statistics. In countries such as Lebanon or Syria, the ability of households to absorb a further surge in energy, transport and food prices is already very limited. In Jordan, exposure to trade disruptions and the decline in tourism directly affects revenue and employment. In Iraq, oil dependence makes the economy extremely sensitive to any major regional disruption. As for Palestine, it is already suffering an economic and human devastation of exceptional intensity. The wider conflict only increases the risk of social saturation throughout the subregion.
It is also in the Levant that the effects on human development seem the most worrying. UNDP estimates that the human development index would decline from 0.4 per cent to 0.7 per cent, which represents a reversal of 0.9 to 1.5 years of progress. This is important because it recalls that a regional war does not only erase wealth. It also destroys human trajectories: education, health, standard of living, employment, food security and prospects for social mobility. A region already marked by the fatigue of crises could thus see its economic horizons closed even further.
Employment and poverty, the dead end of war
The public debate on Middle East conflicts often focuses on oil, strikes and strategic balances. However, one of the strongest lessons of UN evaluation is the labour market. UNDP estimates that escalation could eliminate between 1.61 and 3.64 million jobs in the Arab region. The number is considerable. It even exceeds, according to the report, the total number of jobs created in the region in 2025. Such a reversal means that, in a month of war, the region could not only stop creating activity, but destroy more jobs than it had generated during a full year of recovery.
These losses would affect a wide range of sectors. Tourism is one of the first hit because it immediately depends on the perception of risk. Aviation and logistics are following up due to airspace closures, rerouting and additional security costs. Retail trade suffers from declining consumption, while real estate and major projects slow down as a result of uncertainty. In several countries, small and medium-sized enterprises become the first invisible victims of regional war: they have less cash flow, less access to credit and less ability to absorb a prolonged shock.
The second dead end is poverty. UNDP estimates that an additional 3.05 to 3.96 million people could fall below the poverty line throughout the Arab region. The Gulf countries are not included in this calculation because of a very low level of basic poverty, which further increases the weight of the Levant and the Arab least developed countries in the regional increase. This redistribution of vulnerability is politically heavy. It means that the social cost of war will be borne, in large part, by the already least armed economies to deal with it.
A warning also for the world economy
When Abdallah Al Dardari claims that every day of delay in stopping fighting has a negative impact on the world economy, he does not make an abstract warning. The link between regional war and the world economy is direct. The Gulf remains a major hub of energy, freight, sovereign investment and maritime routes. Any prolonged disruption around the Ormuz Strait or energy infrastructure has immediate effects on prices, inflation, transport costs and growth expectations well beyond the Arab world.
Markets have already begun to integrate this threat. Reuters reported at the beginning of the month that the escalation in the Middle East reversed several market consensus by 2026, with a decline in risky assets, a rise in the dollar and a revision in expectations of lower rates. War therefore acts as a potential stagflationist shock: it combines pressure on energy prices and weakening growth prospects. For importing economies, particularly in Asia and Europe, this combination is particularly dangerous. For Arab economies, it is doubly expensive, as it is subject to both internal shock and global demand adjustments.
Egypt’s warning is in the same direction. In Cairo, President Abdel Fattah al-Sissi estimated that oil could exceed $200 if the war continued, with a serious risk to global food supplies and the stability of intermediate or fragile economies. This type of warning is not a mechanical prediction, but it highlights how the crisis is perceived as systemic. The Middle East is not just going through a war sequence. It is undergoing a test for the entire world economy.
A region forced to review its model
One of the most political messages of UNDP is the appeal by Abdallah Al Dardari to reassess the strategic, budgetary, sectoral and social choices of the countries of the region. This sentence goes well beyond the short-term comment. In essence, it says that the present war exposes the fragility of a regional model that is too dependent on hydrocarbons, shock-sensitive trade, vulnerable logistics routes and incomplete economic diversification.
UNDP therefore calls for enhanced regional cooperation, greater diversification of economies, secure trade and logistics systems and expanded partnerships. It is a reminder that no economy in the region, not even the richest, can prosper in an environment where war becomes a recurring risk. Energy rent is no longer enough to guarantee resilience. Neither is the financial depth. What is lacking in such a sequence is a regional architecture capable of absorbing the shock without destroying years of economic effort in a few weeks.
In the short term, the priority remains obviously the cessation of hostilities. But in the medium term, the figure of $186 billion raises another, broader question: how many more times can the region endure such turmoil without compromising its development trajectories? The answer is already reflected in UNDP figures: GDP decline, job destruction, rising poverty and delayed human development. The cost of the conflict is not only in billions. It is also measured in time lost, suspended reforms, deferred investment and private generations of a stable economic environment.
