US-Iran War: Gulf Faces $790 Billion Economic Loss by 2030

The US-Iran conflict is creating a major economic and fiscal shock across the Gulf, with credit insurer Allianz Trade estimating more than $200 billion in physical damage and a cumulative $790 billion loss in regional economic output through 2030.

The war began on February 28, 2026, when the US and Israel attacked Iran. Tehran subsequently restricted shipping through the Strait of Hormuz and targeted energy facilities across the Gulf. Allianz Trade said most of the physical damage has been concentrated in energy infrastructure, with more than 80 facilities reportedly hit, mainly in Kuwait, Qatar and Bahrain. Approximately one-third suffered severe damage.

Oil prices retreat as Washington favours economic pressure

Brent and WTI crude futures fell for a second consecutive session on Tuesday, reaching their lowest closing levels since August 31 after US President Donald Trump indicated that further military strikes against Iran were unlikely for now. Brent briefly fell below $90 per barrel for the first time since August before recovering some losses.

Trump said Iran was “militarily effectively over” and suggested the conflict could end “fairly soon”. However, he confirmed that the US naval blockade in the Strait of Hormuz would remain in place and that American forces were still “locked and loaded”.

US Secretary of State Marco Rubio said the administration had considered returning to military conflict or reaching an agreement with Iran, but had chosen sustained economic pressure. Speaking at the G7 foreign ministers’ meeting in Paris, Rubio said the campaign was imposing significant economic costs on Tehran and had no fixed end date.

Brent has fallen around 22% from its six-month high of $118 per barrel reached on October 30. ING strategists estimated that Gulf crude exports had recovered to around 80% to 85% of pre-war levels, while refined fuel shipments had recovered to only 35% to 40%. Eurasia Group analyst Gregory Brew cautioned that oil prices may struggle to remain below $90 without more durable signs of de-escalation and a US-Iran agreement.

Gulf faces prolonged fiscal and economic pressure

Allianz Trade projects a cumulative $790 billion loss in GCC economic output through 2030 compared with pre-war expectations, equivalent to a 5.9% gap relative to the region’s projected GDP trajectory. The insurer expects GCC GDP to contract by 4% in 2026, which is 8.2 percentage points below its pre-war forecast.

Kuwait, Qatar and Bahrain are expected to face the steepest economic declines. Saudi Arabia and the UAE are considered relatively less exposed because they have alternative routes to bypass the Strait of Hormuz, while Oman has benefited from its position as a gateway to global markets.

The report projects cumulative GCC budget deficits of $475 billion between 2026 and 2030, expected to be financed largely through additional borrowing and withdrawals from foreign-exchange reserves. The economic impact is also extending beyond energy. Tourism flows declined 22% year-on-year in the first half of 2026, while Dubai property prices fell 10.2% from their January peak by September.

Gulf governments are shifting spending priorities away from mega-projects towards economic resilience and security. Allianz Trade estimates infrastructure and defence commitments of $380 billion to $400 billion through 2030, potentially creating around $160 billion in opportunities for private and foreign investors. Saudi Aramco, meanwhile, reported a 34.6% year-on-year increase in third-quarter net profit.

Iran has also sought to demonstrate its military capabilities. The Islamic Revolutionary Guard Corps released footage of an underground facility containing ballistic and cruise missiles, while senior officials warned that any fresh attack could trigger retaliation beyond the Middle East. The facility’s location and the timing of the visit were not disclosed, and the Jerusalem Post said the footage could not be independently verified.