Higher oil prices can’t shield Gulf economies from Iran war costs

That is not the same as saying Gulf energy shipments stopped altogether. Euronews reported that some oil shipments and Qatari liquefied natural gas vessels were still moving. But rerouting and disrupted shipping do not erase the economic cost when the amount exported falls.

Nor is the forecast confined to oil and gas. The World Bank also points to disruption in tourism, aviation and logistics, as well as uncertainty weighing on markets and business sentiment. Those sectors matter to the wider economy even when oil prices rise.

Air travel offers one measure of the strain. Passenger traffic at Middle Eastern airlines fell 14.6% year over year in August, while available capacity dropped 9.3%, Euronews reported, citing figures from the International Air Transport Association. Aviation consultant Omar Hashmi told Euronews: “When airspace is closed, and routes become longer, there is also the headache that flight timings change”.

The disruption also reaches gas customers outside the region. Euronews reported that an Edison notice said a QatarEnergy force majeure affected 35 scheduled cargoes from April through early December, equivalent to about 4.6 billion cubic meters of gas intended for Italy’s Adriatic LNG terminal. Edison said it had secured replacement supplies and could meet its customer commitments. That account shows both the reach of the shock and how a buyer can find alternatives; it does not mean every shipment or customer faces the same outcome.

The World Bank’s 4.3% figure is an average for the six GCC economies, not a forecast for each member country. It captures a regional economic contraction, including non-oil activity, rather than an isolated prediction about the oil sector.

How can the conflict raise costs beyond the Gulf?

The World Bank identifies shipping delays and strained supply chains as routes to higher import costs and food-price pressure across much of the broader region. For households, that link matters because a disruption to transport can raise the cost of goods well beyond the ports and energy companies directly affected. The bank flags the inflation risk; it does not frame every country’s or household’s experience as identical.

Oil markets have also registered concern about the conflict’s potential to squeeze supply. On Thursday, the global oil benchmark was up about 5%, with Brent above $105.20 a barrel and U.S. West Texas Intermediate near $92.75, Euronews reported. European shares opened lower and government bond yields were elevated as investors weighed renewed inflation risks, a market reaction distinct from the World Bank’s annual economic forecast.

India offers another reported example of how higher fuel costs can press on economic policy beyond the Gulf. On Wednesday, the Reserve Bank of India raised its benchmark repo rate by 25 basis points, to 5.50%. Euronews linked the move to war-related price increases and pressure on the rupee. The decision illustrates a possible policy channel for inflation, not a finding in the bank’s Gulf forecast.

The World Bank’s regional figures also show why the shock should not be described as uniform. It projects the wider Middle East, North Africa, Afghanistan and Pakistan region to contract by 2.1% in 2026, after 3.3% growth in 2025. Within that region, oil-importing economies are projected to grow 4.3% this year, up from 3.9% in 2025. Different exposure to energy exports and disrupted trade produces different outlooks; the regional downturn does not mean every economy is shrinking.

What would it take for Gulf economies to recover?

The bank’s projection for a rebound is conditional. If the conflict eases by the end of 2026, it expects the wider region excluding Iran to grow 7.8% in 2027, with recovery in hydrocarbon production and exports doing much of the work. That is a forecast tied to a stated condition, not a guaranteed return to growth.

The World Bank also warns that damage to infrastructure, investment delays and depleted government financial buffers could prolong the effects. Even if oil prices stay high, recovery depends on the ability to restore production and move goods, as well as to revive activity in sectors hit by travel and logistics disruption.

That makes protecting people part of the economic response, not a separate concern. Ousmane Dione, the World Bank’s vice president for the region, said that shielding vulnerable households, restoring productive capacity and investing in more resilient energy and transport networks would help limit lasting harm to living standards and growth. The forecast’s central warning is that higher prices alone cannot repair the volume of trade, production and economic activity lost to conflict.