Beirut – The United Nations Economic and Social Commission for Western Asia (ESCWA) issued a stern warning. It highlighted an unprecedented escalating economic cost in the Arab region. In just two weeks, approximately $63 billion (1.6%) of the region’s GDP vanished. This was due to violent disruptions in energy markets, international trade routes, and air navigation. This situation presents the 21 member states with one of the toughest economic tests in their modern history.
An ESCWA report was titled “Conflict and its Repercussions: Escalation of the Crisis in the Arab Region.” It indicated that a one-month continuation of the US-Israeli war on Iran could lead to losses of up to $150 billion. This equals 3.7% of the region’s GDP. Such an event would transform fleeting shocks into chronic structural crises.
The report noted that Gulf Cooperation Council (GCC) countries bear the brunt of direct financial losses. Local stock markets are bleeding market value. Sovereign yield spreads are widening. This reflects rising geopolitical risks. It also increases the cost of insuring sovereign debt.
In the energy sector, ESCWA estimates pointed to a sharp decline in oil production. This was at a rate of 20 million barrels per day during the first two weeks. The decline resulted from paralysis in export routes. Liquefied natural gas (LNG) supplies were also disrupted, especially from Qatar. This led to an 80% increase in gas prices in Europe.
The air navigation and tourism sectors were also severely impacted. Over 18,400 flights were canceled at nine regional airports within 12 days. Airlines incurred initial losses of about $1.9 billion. These losses are projected to rise to $3.6 billion if the war continues for a full month.
The report warned that humanitarian needs currently encompass 82 million people requiring assistance. Additionally, 210 million people live in conflict-affected areas. This makes the ability of states to withstand new economic shocks almost impossible.
The report outlined two main scenarios. The first involves the war continuing for 30 days. This would lead to a surge in inflation and a slowdown in non-oil sectors in the Gulf. The second, a darker scenario, depicts a comprehensive regional conflict lasting one year. This would disrupt energy supply chains. It would also undermine sustainable development goals. The region would be set back decades in poverty and education levels.
ESCWA affirmed that the probability of these comprehensive and destructive scenarios occurring is currently low. However, their implications demand high regional readiness. Urgent international coordination is also needed. This is to mitigate the effects of this “strategic disruption” that threatens the stability of the entire global system.