Escalating conflict in the Middle East could push the Gulf economies into recession this year, with the scale of the downturn depending largely on how long the fighting lasts and whether energy infrastructure suffers lasting damage, Jason Tuvey, deputy chief emerging markets economist at Capital Economics, said in a note.

Turvey says there are three potential conflict scenarios. Even a short-lived war would likely dent economic activity across the region.

“In all cases, these economies would probably record negative growth this year,” he says.

A conflict that ends within weeks could result in GDP contractions of around 1–2%, while a prolonged crisis involving sustained disruptions to oil and gas infrastructure could trigger declines of 10–15%, although fiscal support from governments would likely soften the blow.

The key driver of the economic impact is the disruption to hydrocarbon production. Iran’s attacks have not yet caused lasting damage to Gulf energy infrastructure, Tuvey notes, but the effective closure of the Strait of Hormuz has already halted exports across much of the region. With storage facilities approaching capacity, several producers — including the United Arab Emirates, Kuwait and Saudi Arabia — have begun shutting down wells.

Under a relatively benign scenario in which the conflict ends within weeks and the strait reopens quickly, production would resume relatively swiftly. But if the conflict lasts for several months, hydrocarbon output would remain constrained for longer, and in the most severe scenario damage to facilities could delay the recovery of production well beyond the end of hostilities.

“Overall, the impact on GDP growth in the Gulf ranges from 2–5 percentage points in a short conflict to 5–15 percentage points in the most severe scenario,” Tuvey says.

Kuwait and Qatar are particularly exposed because hydrocarbons account for a larger share of their economies. Qatar is especially vulnerable because all of its liquefied natural gas exports currently depend on shipping routes affected by the disruption. By contrast, Saudi Arabia and the UAE are somewhat better insulated thanks to westward pipelines that allow a portion of their oil output to bypass the Strait of Hormuz, running to the Red Sea.

Beyond the energy sector, the conflict would also weigh heavily on services industries sensitive to geopolitical risk. Tourism is likely to suffer the sharpest impact. “Arrivals typically fall by around 40% following a security event and in some cases by as much as 80%,” Tuvey notes, adding that tourism demand often takes years to fully recover.

Within the Gulf Cooperation Council, tourism’s economic contribution is particularly significant in Bahrain and the UAE. More broadly, sectors such as wholesale and retail trade, hospitality, transport and recreational services would also be vulnerable to falling consumer confidence and increased uncertainty.

Even in the event of a short conflict, these sectors are likely to experience a near-term slowdown. However, Tuvey argues that the timing of the crisis may limit the damage. The Gulf region is entering the seasonal low point for tourism, meaning visitor numbers could rebound later in the year if security concerns ease quickly.

Higher oil prices could also provide governments with the fiscal space to cushion the economic shock. “Balance sheets are strongest in the UAE, Kuwait and Qatar,” Tuvey says, suggesting these countries would be well positioned to support their economies if needed. Saudi Arabia, he adds, would probably slow or reverse its recent fiscal consolidation efforts.

Nevertheless, the risks increase sharply if the conflict drags on. A prolonged disruption would deepen the downturn in vulnerable sectors and delay the recovery in tourism and investment. Dubai — a regional hub for tourism, expatriate workers and international business — could prove particularly exposed if perceptions of regional instability persist.

For Tuvey, the analysis underscores the fragility of the Gulf’s economic outlook in the face of geopolitical shocks. Even under the most optimistic scenario, the region is likely to experience a significant hit to growth this year. “And if the war continues for some time,” he warns, “there’ll be an effect on long-term prospects too.”