Gulf Economies Fractured by US-Israel War on Iran

The ongoing conflict between the United States and Israel against Iran is inflicting significant economic damage on Gulf Cooperation Council (GCC) states, disrupting decades of investment in economic diversification. The crisis, marked by Iranian retaliation and a near-closure of the Strait of Hormuz, is generating political shockwaves and crippling financial fallout across the region.

Geopolitical Squeeze and Economic Fallout

GCC states identify themselves caught between opposing forces, a situation described by journalist Salem Al-Jahouri as being “between the hammer and the anvil.” Qatar’s Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani labeled Iranian strikes as a “betrayal,” highlighting that attacks on Gulf states commenced shortly after the war began despite ongoing diplomatic efforts to prevent escalation. These states are now managing the economic consequences of a conflict they neither initiated nor supported, having previously advocated for a diplomatic resolution that was ultimately rejected by the US and Israel on February 28th.

Strait of Hormuz Closure and Impact on Oil Exports

The most immediate economic impact stems from the virtual closure of the Strait of Hormuz, a critical global shipping lane handling approximately 20 million barrels of oil per day – roughly 20 percent of the world’s seaborne oil trade. Export volumes have plummeted to less than 10 percent of pre-conflict levels, creating severe bottlenecks. Iraq is particularly vulnerable, possessing only a six-day storage capacity for crude oil. Source: Al Jazeera

Escalating Regional Tensions

The conflict extends beyond the Strait of Hormuz. Iran has targeted the busiest international airport and retaliatory strikes have been felt across neighboring Gulf states. Source: AP News Mohammad Bagher Ghalibaf, a key Iranian figure, warned the United States and Israel that Iran will “abandon all restraint” if its Gulf islands are attacked, signaling a potential escalation of the conflict. Source: WIONews

US and Israeli Strikes Across Iran

The United States and Israel have sustained attacks on Iran over the past two weeks, targeting leadership and military infrastructure. The initial strikes on February 28th resulted in the death of Ayatollah Ali Khamenei, the former Supreme Leader of Iran. Source: BBC News The US has claimed to have attacked approximately 6,000 targets across Iran, while visual evidence confirms at least 142 attacks, including 65 in Tehran. Satellite imagery indicates damage to a nuclear facility at Natanz and three Iranian missile sites. The US has also reported destroying 60 Iranian ships, including 16 mine-laying vessels, near the Strait of Hormuz.

UN Response and Regional Isolation

The United Nations Security Council has voted 13-0 to demand a halt to attacks on Gulf neighbors, reflecting Iran’s increasingly isolated position as it launches missiles and drones in retaliation for US-Israeli strikes. Source: AP News

The situation remains volatile, with significant economic and geopolitical ramifications for the Gulf region and global energy markets.