Saudi Arabia and the UAE demonstrate notable resilience amid regional turmoil, largely thanks to oil export routes that bypass the strategically critical Strait of Hormuz, which Iran has shut down.
Severe Economic Strain on Gulf States
Justin Alexander, director at Khalij Economics, emphasizes the profound economic damage inflicted on Gulf nations. With the conflict ongoing, he warns that the full extent of the fallout remains difficult to gauge. “Even if hostilities cease immediately, significant economic repercussions will persist before any semblance of normalcy returns,” Alexander asserts.
Beyond Physical Infrastructure Damage
The economic turmoil extends far beyond the destruction of energy facilities. The closure of the Strait of Hormuz—through which approximately 20% of the world’s oil and liquefied natural gas (LNG) transit—has drastically slashed export volumes, intensifying financial pressures on Gulf producers who depend heavily on these routes.
Saudi Arabia has pivoted to utilizing its East-West pipeline, channeling crude oil to the Red Sea port of Yanbu. Simultaneously, the UAE employs the Fujairah pipeline to circumvent the strait. However, these alternatives combined transport less than half the capacity traditionally managed via Hormuz, constricting export capabilities and revenue streams.
Global Energy Crisis and Regional Economic Warnings
Fatih Birol, head of the International Energy Agency, has labeled the current scenario the “biggest energy crisis in history.” Echoing this grave outlook, Qatar’s finance minister cautions that the comprehensive economic ramifications of the Iran conflict have yet to fully materialize.
Strategic Shifts in Gulf Energy Infrastructure
Bader Al Saif, professor at Kuwait University and fellow at Chatham House, highlights a strategic pivot underway. The crisis is likely to propel nations such as Qatar, Kuwait, and Bahrain to develop extensive pipeline networks as reliable alternatives to tanker shipments, aiming to secure their energy exports against ongoing geopolitical risks.
