TEHRAN, IRAN – APRIL 17: An Iranian surface to surface Ghasedak missile is driven past portraits of Iran’s late founder of the Islamic Republic, Ayatollah Ali khamenei (R), during the annual army day military parade on April 17, 2008 in Tehran, Iran.
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The war with Iran and the recurrent closures of the Strait of Hormuz have rattled financial markets across the globe, but the greatest immediate costs are being borne by the Arab Gulf states, long safe havens of domestic and international investors. Missile strikes and drone attacks have damaged critical facilities, disrupted aviation, and undermined the aura of stability that had long distinguished these states in the often-turbulent Middle East. According to the April 2026 IMF Regional Economic Outlook Update, flight departures fell by roughly one-third in Abu Dhabi, about two-thirds in Dubai, and approximately three-quarters in Doha during the first months of the conflict, while some Gulf airports experienced complete suspensions. Infrastructure of all types was damaged, and the myth of safety was shattered.
The physical destruction was significant, yet this was not Tehran’s principal objective. The broader aim was to erode confidence in the Gulf as a dependable international commercial crossroads. In this respect, Iran inflicted irreversible devastation on its Arab neighbors despite professions of Islamic solidarity.
Moreover, the IRGC commanders who ordered these strikes could not have failed to recognize the poisonous long-term repercussions the attacks would have on the mutually beneficial relationships they had formerly had with their Arab neighbors: banking in the UAE, joint exploitation of the huge gas field with Qatar, and the China-brokered rapprochement with Saudi Arabia, the Land of the Two Holy Mosques, Masjid al-Haram, the Grand Mosque in Mecca which encloses the Kaaba, and Al-Masjid an-Nabawi, the Prophet’s Mosque in Medina, the final resting place of the Prophet Mohammad.
Iran eliminated future leverage by conducting the attacks it has carried out to date. It demonstrated that the Gulf’s economic model can be disrupted whenever tensions escalate. That realization will linger for years, long after the damaged infrastructure has been repaired. Markets recover quickly from broken buildings. They are far slower to forget elevated political risk.
This is where the conflict’s repercussions become transformative, and not in a good way. The Iranian attacks have partially derailed the necessary Gulf Arab diversification away from oil and gas, and toward becoming services and manufacturing powerhouses. The most enduring consequences will not be measured in reconstruction costs but in increased political risk. This will manifest as higher insurance premiums, more expensive financing, and heightened skepticism toward ambitious economic diversification projects launched by the region.
According to the same IMF report, five of the eight directly affected oil exporters in the Middle East and North Africa are expected to experience economic contractions following the conflict, with growth revisions revised down by as much as 15 percentage points in some cases. Those figures illustrate that insecurity imposes costs extending well beyond the battlefield.
Havens Upturned
For years, Gulf governments sought to redefine themselves as global centers for finance, logistics, tourism, technology, and advanced manufacturing. Those ambitions remain achievable if Iran fundamentally changes its ways, but investors will now assign a different probability to future disruptions. Political risk premiums will become permanent features of financial calculations. Hospitality, real estate, aviation, and international business services all depend upon perceptions of security and reliability. Once uncertainty enters the equation, every project becomes more expensive.
Ironically, this environment may strengthen Saudi Arabia’s relative position if reforms initiated by the Crown Prince Mohammad bin Salman persevere. As maritime routes become less dependable, pressure will intensify to expand east-to-west infrastructure across the Arabian Peninsula so energy can be shipped via the Red Sea. The Houthis were surprisingly calm in the latest round of fighting, and an arrangement between Ar-Riyadh and Sanaa may help secure that calm.
Pipelines, railways, industrial corridors, and overland logistics networks will reduce dependence upon vulnerable waterways. Riyadh possesses the geography and scale to benefit disproportionately from these adjustments, while the smaller Gulf monarchies may discover their bargaining position gradually weakening.
Capital is already responding accordingly. Rather than accelerating domestic investment, Middle Eastern sovereign wealth funds are likely to become somewhat more cautious in the near term, increasing allocations abroad until confidence returns. This should not be interpreted as a demonstration of financial strength. Instead, it reflects diminished faith in the ability to expand aggregate demand at home, protect new ventures, or sustain diversification without interruption. An apt comparison can be found with Japan during its lost decade, when enormous savings increasingly sought returns elsewhere because opportunities at home appeared less compelling.
Some indications of this trend have already emerged. Gulf capital is surfacing in unexpected sectors and jurisdictions, including entertainment assets in Hollywood, as the acquisition of Warner Brothers studio demonstrated. Meanwhile, industries that prize stability above all else may quietly relocate some of their operations. According to the IMF, tanker traffic through the Strait collapsed from roughly 70 vessels per day to near zero at the height of the disruption. Some industries centered in the Gulf, such as gold refining, are already moving, as fellow Forbes contributor Wesley Alexander Hill demonstrated. Even after navigation resumes, boardrooms will remember how quickly supply chains can seize up. Precious metals trading has already begun to adjust, and other international mobile industries are likely to reconsider where they concentrate their assets.
Politics Readjust
This changing landscape also alters geopolitics. For decades, influence in the Strait of Hormuz and the Gulf has been a central objective of great power competition. As China continues to draw much of its oil from the region, this is likely to persist. And Oman may represent a notable exception if shipping patterns allow it to capitalize on tolls and logistics associated with maritime traffic in the most vulnerable chokepoints.
The ability to influence small numbers of elites and provide minimal assistance to influence huge quantities of hydrocarbons was incredibly valuable. The focus of initiatives such as the Abraham Accords or I2U2 on the region stands as a testament to this. The Gulf States have long been a fulcrum of world geopolitics.
Investors and policymakers should approach new opportunities and promises with measured expectations. Rich incentives and generous promises cannot eliminate structural realities. Gulf states will want to project an aura of normality and will spend lavishly to propagate that narrative. In reality, confidence, once shaken, requires years to rebuild. The Gulf will remain indispensable to global energy and finance, yet the conflict has demonstrated that safe havens are ultimately judged not by their aspirations but by their resilience. That lesson may reshape regional economics long after the shooting finally stops.