There is an old saying, attributed to the British Foreign Office in colonial days: "Keep the Persians hungry, and the Arabs fat." Washington appears to have taken that advice to heart. The trouble is, when the hungry finally have nothing left to lose, it is the fat who pay the price.

There is something darkly rational about Iran’s approach to this war. The Islamic Republic entered the conflict already ruined. Inflation was running above 48% in December 2025. The rial had crossed one million to the dollar in March 2025 and hit 1.75mn by December, making it the least valuable currency on earth. The IMF projected real GDP growth of just 0.3% for 2025, revised down from 3% only two years earlier. The government’s own budget commission put the deficit at 1,800 trillion toman. Seven million Iranians were going hungry. Meat had become a luxury. Half the country’s industry had stopped because of rolling blackouts.

You cannot bankrupt a country that is already bankrupt. That is the perverse advantage Tehran holds.

US sanctions had already severed Iran from the global financial system long before the first cruise missile hit. Oil exports, which the budget assumed at 1.85mn barrels per day at $67 a barrel, were running closer to 1.1mn bpd according to IMF estimates. Capital flight reached $14bn in the last nine months of 2024 alone, on top of $20bn the year before. The central bank reported a net capital account of negative $21.7bn for the last fiscal year – the worst on record. The IMF calculated that Iran would need oil at $163 a barrel just to balance its 2025 budget. That figure belongs in the realm of fantasy.

So when US-Israeli strikes hit on February 28, Iran’s economy was already in what the Clingendael Institute called a position approaching the precipice. The war made things worse, but not in the way wars normally do. Iran was not knocked off a ledge. It was already at the bottom. The country’s nominal GDP had dropped below $400bn. Sanctions, corruption, energy shortages and decades of mismanagement had already done the damage. Analysts at Eye for Iran noted that Tehran exited 2025 “battered yet still standing”, interpreting survival as grounds for taking greater risks in 2026.

The Persian Gulf Arab states, by contrast, entered this war from a position of apparent strength – and that is precisely their vulnerability.

Saudi Arabia’s Public Investment Fund held $941bn in assets. The UAE’s sovereign wealth funds collectively managed over $1.5 trillion. Qatar had spent decades building itself into the world’s largest LNG exporter. Dubai International Airport handled 95.2mn passengers in 2025. These economies were wired into every artery of global finance: US Treasury bonds, Silicon Valley venture capital, London real estate, European football clubs. Gulf sovereign wealth funds collectively held over $2 trillion in US assets alone.

That connectivity is now their Achilles heel.

When Iran closed the Strait of Hormuz and launched retaliatory strikes across the Gulf, it did not just damage military targets. It severed the export routes on which these economies depend for their survival. Bahrain, Iraq, Kuwait and Qatar ship between 87% and 95% of their hydrocarbon exports through the strait. Fitch estimated that each week of closure reduces hydrocarbon export revenues for those four countries by 0.4% of GDP. JP Morgan cut its non-oil growth forecast across the entire GCC by 1.2 percentage points, with the UAE suffering the steepest revision at 2.3 points. Iraq has already cut production by 1.5mn bpd as storage fills. Saudi Arabia holds 66 days of supply, the UAE 22, Kuwait 18, and Iraq just six.

The damage extends well beyond oil. Over 21,300 flights were cancelled at seven major Gulf airports in the first four days. Emirates flights collapsed from 527 on February 24 to 309 by March 10. Etihad went from 325 to 56. Qatar Airways fell from 563 to 66. Tourism Economics projects that inbound travel to the Middle East could drop between 11% and 27% in 2026, representing 23mn to 38mn fewer visitors and $34bn to $56bn in lost spending. The World Travel and Tourism Council estimated the region’s tourism sector was losing €515mn every day. The Burj Al Arab caught fire from drone debris. Missile fragments rained on the Palm Jumeirah. Dubai’s entire tourism brand – built over decades – took a direct hit in the space of a weekend.

Saudi Arabia was already running budget deficits since 2022. The kingdom needs oil at $92 a barrel according to the IMF just to balance its books, and $111 if you include PIF domestic spending according to Bloomberg Economics. Brent was sitting around $71 before the conflict. Goldman Sachs had projected the 2026 deficit at 6.6% of GDP. The kingdom had already become one of the largest emerging-market sovereign borrowers, raising nearly $20bn in international debt through 2025. The PIF had quietly cut some project budgets by 60%. Neom’s initial phase was scaled back from 170km to five.

Three of the four largest Gulf economies – Saudi Arabia, the UAE, Kuwait and Qatar – initiated internal reviews of existing contracts and future US investment commitments, according to the Financial Times. The investment pledges made during Trump’s 2025 regional tour, presented at the time as a major economic victory, are now under review as governments face what one Gulf official described as four simultaneous budget pressures: reduced energy income, declining tourism and aviation revenue, spiking defence costs, and disrupted supply chains.

Iran has no sovereign wealth fund to lose. It has no tourism sector to collapse. It has no hub airline network to ground. It has no $2 trillion in US assets that could be frozen, no Eurobond issuance schedule that could be disrupted, no Vision 2030 mega-projects that could be mothballed. Its economy was already contracting. Its currency was already worthless. Its people were already hungry. The war simply confirmed what sanctions had already accomplished.

For the Persian Gulf Arab states, the calculus is entirely different. Their wealth is real, liquid, and exposed. It sits in New York property portfolios and London bank accounts and Asian LNG contracts and European football clubs. It depends on open sea lanes, open airspace, and the confidence of international investors and tourists. Every day the Strait of Hormuz stays closed, every drone that hits a terminal, every flight that gets cancelled, chips away at something Iran never had to begin with.

That is why Tehran can afford to play the long game. And it is why Riyadh, Abu Dhabi and Doha cannot.