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EXPERT COMMENT

The war unleashed on Iran by Israel and the US will have profound implications for Middle East economies – mainly negative for both producers and consumers.

For the oil and gas exporters in the Gulf, the US-Israeli war with Iran has already exacted a heavy toll through lost revenue. Matters could get even worse if major installations are seriously damaged.

Regional energy importers, meanwhile, are facing stresses from higher fuel costs and losses of foreign currency earnings, which will push up inflation and aggravate socio-economic tensions.

It is striking that amid the crisis, while its economy is being badly damaged by the war, Iran is still exporting oil to China using the Strait of Hormuz – even as it closes the passage to Gulf countries’ shipping.  

It’s possible the US is refraining from attacking Iranian traffic in hopes of preserving the infrastructure that any new Iranian regime would depend upon. Gulf Arab states’ fear of further escalation, and Trump’s wariness of antagonizing China prior to a planned summit later this month, may also be playing a part.

Click here to continue reading the full version of this Expert Comment on the Chatham House website.