Bisinomics

Persian Gulf 

Post-war reconstruction is in the minds of Arab partners of the  United States, who were collateral casualties in the hostilities  between the US-Israel alliance and Iran. Indeed, Saudi Arabia,  among others, pressed Washington to return to the negotiating  table, as The Wall Street Journal revealed.  

‘The Arab states,’ a United Nations Development Programme  report forecast, ‘could see GDP decline between 3.7 per cent and 6  per cent, equivalent to losses of up to $194bn.’ 

Arabian Business reported that ‘Elevated oil prices have provided  some support in the near term, although lower export volumes  have weighed on overall economic performance.’ It projected a  contraction of 0.2 per cent in 2026 for Gulf Cooperation Council  economies because of disruption in commerce, tourism and  energy exports. 

Saudi Arabia 

The US-Israel war on Iran has had somewhat less impact on Saudi  Arabia than on other states in the region. Despite that, Saudi  banks were said to be vulnerable to the fallout of a prolonged  warfare. Fitch Ratings warned Saudi banks’ asset quality,  profitability and funding would come under pressure if the war  continues.

Fitch, whose assessment covered 11 banks, described an ‘adverse  scenario’. It added, ‘Higher inflation and higher-for-longer interest  rates would pressure net interest margins, with increased  competition for liquidity raising the cost of funding. Higher  interest rates would also put pressure on borrowers, potentially  lifting impairment charges and further hurting banks’  profitability.’ 

Saudi Arabia has restored the East-West oil pipeline to its full operating capacity of about 7 million barrels a day, reestablishing a critical route for crude shipments to the Red Sea. 

However, thanks to a pipeline to the country’s Red Sea coast, Saudi  Arabia achieved oil exports at about two-thirds of pre-war levels.  Besides, its economy was insulated by decent domestic demand.  

United Arab Emirates 

Stellantis Middle East, a car distributor, offered free short-term  vehicle access to small businesses and community organisations  across the UAE, as part of efforts to support local economic  activity. 

Arabian Business wrote that ‘Hospitality leaders from across the  UAE joined together… to form a Tourism Majlis to discuss a  recovery plan for the industry following the regional downturn  sparked by the Iran crisis.’ The consensus reached was that the  sector needs ‘to reinvent itself’. 

Property development, sale of flats and houses and leasing of  office space to foreign entities have for decades been a money  spinner for Dubai, indeed one of the pillars of its economy.  Arabian Business noted ‘Dubai’s residential property market  entered a more measured phase in the first quarter of 2026, with  transaction volumes falling 17 per cent from the previous quarter  after three consecutive quarters of record activity.’ The trend  continued in April.

Qatar 

Qatar Airways, a leading international airline, posted on X:  ‘Customers with a confirmed booking on Qatar Airways operated  flights for travel until 15 June 2026 are eligible for complimentary  date changes up to 31 October 2026…’ This underlined the  uncertainty caused by the war, which compelled the concession. 

Commercial aircraft from Qatar Airways sit parked at Doha’s airport after the airline offered flexible rebooking options amid regional airspace uncertainty triggered by the Iran war. 

Iranian missile strikes knocked out an estimated one-fifth of  Qatar’s liquefied natural gas (LNG) production. To fill this  shortfall QatarEnergy and the US company Exxon Mobil secured  the Trump administration’s approval to start exporting LNG  cargoes from Texas in April. 

Arab Gulf Business Insight (AGBI) depicted: ‘Over a few days in  early March, Qatar went from forecasts of soaring gas production  and GDP growth to halted energy operations and severe economic  contraction. This marked the biggest reversal of fortunes among  Gulf states as the Iran war upended expectations everywhere.’ 

Patrick Theros, a former US ambassador to Qatar, was quoted as  saying, ‘The biggest victims [in Qatar] are going to be the  expatriate community, a large number of whom are going to be  sent home.’  

Kuwait 

Kuwait was on the receiving end of counter-attacks by Iran causing  considerable damage to its oil and gas infrastructure. 

Kuwait faced a ‘triple whammy’, according to Li-Chen Sim, an  associate fellow at the Middle East Institute. The virtual closure of  the Strait of Hormuz paused Kuwait’s oil exports, insufficient  storage capacity forced down production and this will delay a  return to normal operations after the war; a diminution in Qatar’s  gas output deprived Kuwait of its primary source of LNG.  

Sim warned ‘Kuwait could face rolling blackouts since … it does  not have supplies of non-associated gas that it can use  domestically. No oil production basically means no gas production  in Kuwait’s case.’ State-owned Kuwait Petroleum Corporation  halted oil deliveries under force majeure. They may now have been  spared the worst.

Bahrain 

Bahrain, also a victim of Iran’s retaliation to the US-Israeli assault,  moved to shield its economy from the headwinds it faced. It  announced a sweeping package of loan deferrals and liquidity  support of $18.6bn for the financial sector. That notwithstanding,  commentary in AGBI was headlined ‘Bahrain’s finances need help  from wealthier neighbours.’ 

The opinion piece asserted: ‘The conflict has deepened existing  fiscal strains and eroded major revenue streams, leaving Bahrain  increasingly reliant on external support as it struggles to stabilise  its finances and rebuild. The smallest economy in the Gulf  Cooperation Council entered the conflict with limited fiscal  buffers and a challenging balance sheet.’ 

Asia’s big four economies 

Asia’s biggest economy, China, sources 20 per cent of its crude  import from Russia and buys most of the rest from the Gulf. The  US Navy’s blockade of the Strait of Hormuz was, therefore, a  potential flashpoint between Beijing and Washington. But even  the unpredictable Trump would not want to sabotage his  scheduled summit with Chinese President Xi Jinping in May. 

Japan purchased 80 per cent of its crude requirements from the  UAE and Saudi Arabia, but had a stockpile of around 250 days’  supply when the war started. Consequently, it was less anxious  than other Asian nations. 

To avoid US sanctions, India has shifted suppliers. It had stopped  buying crude from Iran under the Biden administration and  towards the end of last year drastically cut its imports from Russia.  Then, it was authorised by President Trump to resume trade  relations with both. When the US Navy tried to blockade Iranian  shipments, India was once again in a quandary. A 60-day buffer  stock saved it but with over 65 per cent of its LNG coming from  Qatar, the UAE and Oman it could not avert cooking gas  shortages. 

61 per cent of South Korea’s crude passed through the Strait of  Hormuz. So, it switched to sourcing more from Kazakhstan and  Saudi Arabia via the Red Sea. By mid-April it had secured 273  million barrels, oilprice.com recorded, which will sustain its  economy for more than three months.