The Gulf’s Toughest Test of Recovery: Conflict, Supply Chains, and the New Geography of Risk

News

1. OpenAI Flags Microsoft as a ‘Risk Factor’ Ahead of Potential IPO, Report Says

2. Neuralink’s 1st Human Trial Hits 100 Days, Raises Long-term Questions

3. Jensen Huang Says AGI is Here, and It Can Run Companies Too!

4. Strikes Hit AWS Again as Tesla Moves to Cushion Gulf Disruption

5. Starlink Lands in the UAE, But at a Premium

6. AI Unreliability Top Concern Among Users, Reveals Anthropic Study

The Gulf nations are confronting one of their most turbulent eras in recent times. With the conflict entering its fourth week, missiles and drones hit several nations, including the UAE, Qatar, and Bahrain, causing destruction and an energy crisis that’s spreading far beyond the region. 

The conflict has begun to register not only in geopolitical terms but as a material economic shock. This is no longer a contained military conflict—it’s evolving into a system-level disruption, hitting energy, shipping, cloud infrastructure, and everyday economic activity simultaneously.

Yet amid all of this, many residents are choosing to stay. Notably, over half of the 62 million people in the six Gulf Cooperation Council (GCC) countries are foreign workers.

Although the region has bounced back from chaos before, the impact on industries is notable.

1. Oil and Gas

The war has created the biggest supply disruption in the global oil market. Gulf countries have cut total oil production by at least 10 million barrels per day, down from about 20 million barrels per day before the war, particularly affecting crude and oil products passing through the Strait of Hormuz.

Prices for Brent crude have jumped by over 60% since the conflict began, reaching $112 per barrel, up from nearly $70 at the start. In the past 30 days alone, crude oil prices have risen by about 56%. 

Saudi Aramco, the world’s top oil exporter, has entered its second month of cutting crude oil supply to Asian buyers. It exported 4.355 million barrels per day of crude ⁠in March, down from 7.108 million in February, according to analytics firm Kpler.

​“Following our latest risk assessment and operational review and considering the escalating conflict affecting safe navigation in the Gulf region, we have made the decision to temporarily suspend the FM1 service (connecting Far East to Middle East) and the ME11 service (connecting Middle East to Europe),” Maersk said in a statement. It has suspended various cargo to and from the UAE, Oman, Iraq, Kuwait, Jordan, Qatar, Bahrain, and Saudi Arabia.

Notably, Iran is charging ships $2 million for passage through the Strait, exercising “authority” over the strategic waterway.

The International Energy Agency (IEA) has lowered its 2026 global oil demand growth forecast to 640 kb/d, down 210 kb/d from previous estimates.

While IEA’s 32 member countries have agreed to release 400 million barrels of oil from emergency reserves — the biggest stock release in the agency’s history — the supply alone can’t fully compensate for the massive disruption.

2. Aviation

While the biggest impact has been on the oil and gas sector, it isn’t the only one. Aviation has also been drastically hit, with over 51,000 scheduled flights to or from the Middle East airports disrupted since the US-Israel strikes on Iran began on February 28.

Global airlines sounded the alarm over soaring jet fuel prices triggered by the war, warning of extra costs and higher fares, as flights stand cancelled, rescheduled, or rerouted, with most Middle East airspace remaining closed amid fears of missile and drone attacks.

Meanwhile, a few are operating in the region under dynamic conditions. Emirates is operating close to normal schedule levels with 138 flights departed on March 12 and 141 on March 13. Etihad Airways has resumed a limited commercial flight schedule, operating between Abu Dhabi and several key destinations, and Gulf Air has expanded its temporary operations from King Fahd International Airport in Dammam. 

At present, Dubai remains the most reliable hub in the region. Air freight rates on some routes have reportedly surged by as much as 70%.

Moody’s Ratings report that the global airline profitability will be further impacted by rising fuel prices, which are driving up operating costs and disrupting travel networks.

The conflict has caused big spikes in energy prices. US Gulf Coast jet fuel has jumped to over $3.50 per gallon, 65% higher than last year’s $2.12 average.

Michael O’Leary, CEO of Ryanair, believes this conflict is relatively minor and not as damaging as 9/11 or the Gulf War. “Jet fuel is pretty secure for the next three or four months, as long as the conflict ends reasonably quickly: March, April, May timeframe. We don’t think there’s any risk of disruption to jet fuel.”

3. Hospitality and Tourism

As one of the world’s fastest-growing tourism and hospitality markets, fueled by ambitious government plans and significant investments, the region’s industry is now impacted by the conflict.

Despite a drop in occupancy, hospitality groups have avoided raising prices. Instead, they focus on guest safety, flexible booking options, and keeping trust. Fairmont The Palm in Dubai was damaged when debris from an intercepted attack fell nearby. The hotel remains fully operational. “It resulted in limited exterior damage, with no impact on guest areas or operations,” said Duncan O’Rourke, CEO of the Premium, Midscale, and Economy Division for Middle East, Africa, and Asia Pacific at Accor.

The Middle East plays an important role in global aviation and tourism networks, accounting for around 5% of global international tourist arrivals and roughly 14% of global transit traffic.

The World Travel & Tourism Council (WTTC) estimates that the escalating conflict has already impacted the travel & tourism sector by at least $600 million per day in international visitor spending.

Notably, amidst the prevailing circumstances, Europe is emerging as a secure alternative destination. “Historically, Europe has been seen as a stable and reliable destination during periods of global uncertainty, and there are early signs that this perception will remain intact,” said Eduardo Santander, CEO of the European Travel Commission.

4. Data Centers

After strikes on Amazon Web Services’ data centers in the UAE and Bahrain, concerns have grown about the supply chain and security of tech infrastructure. South Korean officials warn that if the conflict drags on, supplies of key semiconductor materials sourced from the region, including helium, will be disrupted. There are no good substitutes for these materials.

The Digital tool Data Center Map lists 325 data centers in the Middle East. Analyst firm Mordor Intelligence estimates that there are about 35 data centers in the UAE alone, with over 40% classified as large facilities with up to 5,000 servers, hosting workloads from major tech companies such as OpenAI and Microsoft.

What makes the AWS disruption particularly significant is the signal it sends: technology infrastructure is no longer a secondary casualty; it is becoming a potential target.

5. Critical Metals and Raw Materials

Beyond oil and gas, the disruption has impacted other commodities essential to the global economy, including aluminium, fertilizers, ethanol, and helium.

Aluminium futures in the UK rose to $3,440 per tonne, near its highest level in almost four years, after Bahrain’s Alba cut production. The halt from major aluminium smelters in Qatar and Bahrain has forced buyers to opt for replacement metal from Asia. Notably, the Gulf accounted for about 8% of the world’s aluminium supply last year, according to the International Aluminum Institute.

A warning from gas supplier QatarEnergy that natural gas deliveries will be fully suspended due to disruptions has prompted Qatalum, the 50/50 smelter joint venture between Norsk Hydro and Qatar Aluminum Manufacturing Company, to initiate a controlled production shutdown.

Produced during oil and gas refining, sulfur is widely used in fertilizer production and industrial processes. Nearly half of the world’s sulfur supply is currently trapped on the Persian Gulf side of the Strait of Hormuz, according to CRU Group. A major portion of that sulfur moves to China and Indonesia for fertilizer production and nickel processing, and to Africa for agricultural purposes.

With about one-third of globally traded urea passing through the Strait, Urea prices have risen at least 50% since the commencement of the conflict.

Road to Recovery

This conflict ranks among the most significant geopolitical crises in recent history. The economic impact on the region primarily depends on the duration of the crisis and the disruptions in the Strait of Hormuz. “The situation remains highly fluid and adds to an already uncertain global economic environment. It is too early to assess the economic impact on the region and the global economy. That impact will depend on the extent and duration of the conflict,” the IMF said in a statement.

For IEA’s Executive Director Fatih Birol, the conflict has evolved into an unprecedented disruption. “This crisis, as things stand, is now two oil crises and one gas crash put all together,” he said at the National Press Club in Australia. “At least forty… energy assets in the region are severely or very severely damaged across nine countries,” he added.

Tourism will be one of the hardest hit. “We estimate inbound arrivals to the Middle East could decline 11-27% year-on-year in 2026 due to the conflict, compared to our December forecast that projected 13% growth,” said Helen McDermott, Director of Global Forecasting at Tourism Economics. 

Key variables that will determine recovery include oil prices, Iran’s political trajectory, and progress in diversification.

Oxford Economics, after modeling two scenarios for the conflict’s impact, predicts that Iran is unlikely to sustain the fight beyond one or two months. A full regional recovery is possible but will be uneven, since Gulf states like the UAE, Qatar, and Saudi Arabia have stronger financial reserves and reform momentum than places like Gaza, Lebanon, Iran, and Yemen.