Iran-Israel war threatens gulf economies: Capital Economics

Capital Economics said the economic fallout from the Iran-Israel conflict could spread to GCC countries. The extent of the impact depends on whether the conflict expands to neighboring states. So far, the effects are mainly on Iran, but that alone could pressure the global economy.

The report highlighted that countries with close trade links to Iran would be most affected. The UAE is most exposed, with exports to Iran making up 1.2% of its gross domestic product (GDP).

Oman follows with 0.5%, and Turkey at 0.3%, The broker added.

Improved Iran-GCC ties could reduce the risks. But if the conflict escalates, Iran may target US military bases in Qatar, Bahrain, Kuwait, and the UAE.

As long as oil infrastructure remains untouched, the region’s economies have room for growth. The crisis could also prompt other oil producers to boost output to offset Iranian losses.

Capital Economics added that if Saudi Arabia compensates for a 1.5 million bpd shortfall, its oil exports could reach 2.5% of GDP. If oil prices hit $100 a barrel, that figure could rise to 4%.