Stranded Gulf Supplies Are Choking Off the Region’s Economies

Escalating tensions in the Middle East are rapidly constricting energy and essential supply chains across the Gulf region, threatening a global economic downturn. Qatar’s energy minister, Saad al-Kaabi, warned on Friday that the ongoing conflict could force Gulf energy exporters to halt supplies within weeks, potentially driving oil prices to $150 a barrel. Beyond energy, critical infrastructure like water desalination plants are increasingly vulnerable, exacerbating the crisis.

Energy Supply Under Threat

The conflict has already begun to disrupt energy flows. Qatar halted liquefied natural gas (LNG) production following a drone strike on the Ras Laffan plant, further tightening global energy markets. Al-Kaabi indicated that other Gulf producers are likely to declare force majeure and suspend deliveries if hostilities persist. “Everybody that has not called for force majeure we expect will do so in the next few days that this continues,” he stated to the Financial Times . Failure to do so could result in legal liabilities.

Oil prices have already surged, topping $93 a barrel – a two-year high . Al-Kaabi cautioned that prolonged disruptions “will bring down the economies of the world,” impacting global GDP growth and driving up energy prices across the board .

Asian Economies Particularly Vulnerable

The energy shock is being acutely felt in Asia, which relies heavily on Gulf oil imports. The Gulf supplies between 40% and 80% of the seaborne crude imports of China, India, Japan, and South Korea . The effective closure of the Strait of Hormuz, driven by insurance withdrawals and perceived risk, has already halted roughly 20% of global petroleum flow .

Water and Food Security at Risk

The crisis extends beyond energy. Over 400 water desalination plants along the Persian Gulf are vital for industry, residents, and even maintaining amenities like golf courses. Attacks on these facilities could be “absolutely devastating” . Gulf countries, particularly Saudi Arabia, have historically relied on desalination due to depleted groundwater reserves.

The UAE, Kuwait, Oman, and Saudi Arabia all depend on desalination for 90%, 90%, 86%, and 70% of their drinking water, respectively . Smaller states like Qatar and Bahrain have limited strategic water reserves and could face rapid depletion if desalination plants are compromised.

Broader Economic Consequences

The disruption to Gulf exports extends beyond crude oil and water. The region is a significant supplier of petrochemicals and fertilizer feedstocks used in manufacturing, meaning broader supply chain disruptions are anticipated . Al-Kaabi predicts widespread shortages of various products and a slowdown in global economic growth.