The Strait of Hormuz disruption, combined with targeted attacks on oil and gas infrastructure across the Persian Gulf, has placed regional economies under strain, raising the prospect of prolonged economic damage.
Early estimates suggest that the loss of two of Qatar’s fourteen liquified natural gas trains has wiped out around 17 percent of the country’s annual liquefied natural gas exports, alongside roughly 25percent of its gas condensates and a significant share of helium and associated products such as liquified petroleum gas. This translates into an estimated $20 billion in lost annual revenue, in addition to approximately $26 billion in reconstruction costs. Moreover, Qatar’s $29 billion expansion plan—aimed at boosting liquefied natural gas output by 60percent—will now face significant delays.
Gulf Arab economies could contract by between 2 percent and 5 percent in 2026, with the United Arab Emirates likely to suffer the most severe impact.
Across the region, long-term economic transformation strategies are at risk. Saudi Arabia’s Vision 2030 diversification agenda, Oman’s efforts to reduce dependence on oil amid declining reserves, and the United Arab Emirates and Qatar’s ambitions to expand tourism and global transit hubs all face mounting challenges. Iraq’s attempts to attract foreign investment into its energy sector are also under pressure.
Oil storage and fuel infrastructure in Kuwait, Oman, and the United Arab Emirates have sustained damage, with no clear short-term outlook for restoring exports to pre-conflict levels. According to estimates by Goldman Sachs, if disruptions persist for another month, Gulf Arab economies could contract by between 2 percent and 5 percent in 2026, with the United Arab Emirates likely to suffer the most severe impact.
The United Arab Emirates’s vulnerability is acute. While hydrocarbons account for roughly 23 percent of its gross domestic product, nearly one-third of its economy depends on trade and financial services—sectors that the closure of the Strait of Hormuz and ongoing attacks have disrupted. Despite having a pipeline that allows partial oil exports from Fujairah, outside the Strait, Iranian strikes on storage facilities have undermined this alternative route. The United Arab Emirates also has been the primary target of Iranian missile and drone attacks, compared to its Arab peers.
While Iraq is not explicitly included in these projections, it remains one of the region’s most fragile economies alongside Bahrain. According to S&P Global, Iraq’s oil production plunged by as much as 70 percent—to roughly 1.2 million barrels per day—within a week of the conflict’s onset. Given that oil accounts for about 60 percent of Iraq’s gross domestic product, 90 percent of government revenue, and 95 percent of export earnings, the implications are severe. Compounding the crisis, Iraq faces a decline in foreign investment, with around 85 percent of its oil and gas sector funding reliant on external partners. Heightened security risks, including attacks linked to Iran-backed militias, have further deterred investors.
An estimated 3,200 vessels are stranded in the Persian Gulf, exposed to drone attacks.
There is little indication that the conflict will de-escalate soon. Reports suggest that Tehran has rejected a fifteen-point peace proposal put forward by President Donald Trump, while the Islamic Revolutionary Guard Corps has signaled an expansion of attacks targeting regional energy and water infrastructure.
Meanwhile, Bloomberg has reported that Iran has begun demanding payments of up to $2 million per vessel for passage through the Strait of Hormuz—effectively imposing an informal toll. An estimated 3,200 vessels are stranded in the Persian Gulf, exposed to drone attacks. Iran reportedly has attacked at least seventeen ships with drones over the past three weeks.
The deployment of approximately 2,000 troops from the 82nd Airborne Division underscores Washington’s limited confidence in the effectiveness of diplomatic efforts. At the same time, unconfirmed reports suggest that Saudi Arabia may favor the continuation of U.S. and Israeli operations against Iran, while signaling that it could join the conflict if Iranian attacks persist.
The ongoing conflict is not only disrupting global energy flows but also inflicting deep structural damage on the economies of Gulf Cooperation Council states. Beyond immediate revenue losses, the longer-term risks—delayed diversification, declining investment, and heightened geopolitical instability—could reshape the region’s economic trajectory for years to come.
