Gulf states face economic strain from Iran conflict

By Samia Nakhoul

Dubai — The US may have pulled the trigger on the Iran war, but it is the oil-producing region that will pay the price, Gulf sources and analysts say, signalling unease in ties between a region under Iranian attack and the superpower it relies on for protection.

Resentment is mounting in Gulf Arab capitals at being drawn into a war they neither initiated nor endorsed but are now paying for economically and militarily, with airports, hotels, ports and military and oil installations hit by Iranian strikes, said three regional sources, who declined to be identified because they aren’t authorised to speak publicly.

“It is not our war. We did not want this conflict, yet we are paying the price in our security and our economy,” said Ebtesam Al-Ketbi, president of the ⁠Emirates Policy Center. That doesn’t mean Iran is “innocent“, she added.

Gulf governments had assured Tehran they wouldn’t allow their territories or airspace to be used by Washington in the war. Yet Iran has unleashed waves of drone and missile strikes across the region despite those assurances, denting business confidence in the process.

Stay the course

While disquiet about US President Donald Trump is growing over a conflict many believe he launched without consultation, some regional sources argue that having started the war, Washington should now see it through to eliminate what they see as a persistent Iranian threat on their doorstep.

“If America leaves the war now without achieving victory, it will be like abandoning an injured lion,” Ketbi said. “Iran will remain a threat to the region, capable of striking again. And if the regime collapses, leaving a power vacuum, neighbouring states will suffer the consequences.”

If America leaves the war now without achieving victory, it will be like abandoning an injured lion.

—  Ebtesam Al-Ketbi, president of the ⁠Emirates Policy Center

Asked for comment, the White House said US and Israeli strikes had reduced Iran’s retaliatory missile attacks by 90%, “crushing their ability to shoot these weapons or produce more”.

White House spokesperson Anna Kelly added that Trump was in close contact with Middle East partners and that Iran’s attacks on its neighbours underscore why the threat had to be eliminated.

There was no immediate response from Gulf states to requests for comment.

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Iran’s Supreme Leader, Ayatollah Ali Khamenei, was killed on the first day of the war. Tehran responded by hitting Israel and Gulf states hosting US military installations, effectively halting oil and gas shipments through the Strait of Hormuz — a conduit for roughly a fifth of the world’s petroleum and liquefied natural gas (LNG).

Across the region, airspace closures have resulted in airlines cancelling about 40,000 flights, the largest disruption to global air travel since the Covid-19 pandemic. Gulf tourism is also taking a hit, putting the region’s carefully crafted image as a safe and high-end vacation hotspot at risk.

Amid the turmoil, Gulf states have sought to project calm and resolve. In his first public comments since Iran fired missiles at the United Arab Emirates (UAE) Sheikh Mohammed bin Zayed Al Nahyan, said on Friday his nation was in a time of war but was well and told his enemies it was no easy prey.

At the same time, analysts say the war has left Gulf states reassessing their security dependence on Washington and the prospect of eventually engaging Tehran on new regional security arrangements — even as trust in Iran has collapsed.

For decades, relations between Washington and the Gulf states rested on an implicit trade-off: Gulf energy and capital — including hundreds of billions of dollars spent on US arms, technology and goods and services — in return for US protection, said Fawaz Gerges of the London School of Economics.

Now, he said, Gulf states would accelerate efforts to diversify their foreign and security partnerships, realising “they cannot really rely on the US to protect their energy, oil, gas, their people and their sovereignty”.

The Gulf’s latest misgivings about Washington echo disquiet felt in Saudi Arabia at the US failure to retaliate against Iran after drone and missile attack in 2019 on the kingdom’s Abqaiq and Khurais oil facilities. Washington and Riyadh blamed the attacks on Tehran, which denied responsibility.

Abdulaziz Sager, chair of the Saudi-based Gulf Research Center, said Washington had failed to prepare safeguards for its regional allies or ensure oil and gas flows during wartime, and the cost on the Gulf states’ economies is “horrendous”.

‘Simply ignored?’

Sager said the war had demonstrated the limits of relying solely on external security guarantees, particularly from the US, adding that Gulf countries need to strengthen their own defence capabilities and prepare for other crises.

“External powers also tend to make decisions based on their strategic interests rather than those of the Gulf. As a result, Gulf states will likely pursue a more cautious and balanced approach in their relations with both Iran and major international partners,” Sager added.

In a rare public rebuke, prominent Emirati businessman Khalaf Al Habtoor questioned the objectives of the US-Israeli war on Iran.

“If the strikes were aimed at containing Iran, did they take into account the regional consequences — or was the cost of dragging the Gulf into a conflict it was not party to simply ignored?” said Al Habtoor, founder of the Al Habtoor Group.

Saudi Aramco CEO Amin Nasser warned that continued disruption to shipping through Hormuz would have “catastrophic consequences” for oil markets.

Frustration with Trump

Iran’s Islamic Revolutionary Guard Corps said they would not allow “one litre of oil” to be shipped from the Middle East if US and Israeli attacks continued. Trump has warned Washington would strike Iran harder if it blocked oil exports.

Sources close to Gulf Arab government circles say frustration with Trump privately runs deep across the region. Many believe he dragged the Gulf into a war shaped heavily by Israel, without sharing a plan and acting hastily and without fully weighing the political and economic fallout for allies.

One Gulf source familiar with US policymaking said key decisions were crafted by a small inner circle around Trump operating largely outside traditional US policy channels.

“They are businessmen and dealmakers, not career policymakers,” the source said, adding the approach left Gulf partners exposed to the consequences of this circle’s decisions.