{"id":104704,"date":"2025-06-18T00:00:00","date_gmt":"2025-06-18T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/short-term-impacts-of-the-iran-israel-conflict-could-be-positive-for-the-gcc-but-longer-term-impacts-are-less-certain\/"},"modified":"2025-06-18T00:00:00","modified_gmt":"2025-06-18T00:00:00","slug":"short-term-impacts-of-the-iran-israel-conflict-could-be-positive-for-the-gcc-but-longer-term-impacts-are-less-certain","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2025\/06\/18\/short-term-impacts-of-the-iran-israel-conflict-could-be-positive-for-the-gcc-but-longer-term-impacts-are-less-certain\/","title":{"rendered":"Short-term impacts of the Iran-Israel conflict could be positive for the GCC, but longer-term impacts are less certain"},"content":{"rendered":"<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"> <strong>More analysts and credit ratings agencies are weighing in on the <\/strong><strong>implications of <\/strong><strong>t<\/strong><strong>he escalating conflict between Israel and Iran on the MENA region<\/strong> and for the global economy at large \u2014 and while there is some lack of clarity over what might happen, the question is currently not whether there will be impacts, but how significant they will be. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>(Tap or click the headline above to read this story with all of the links <\/strong>to our background as well as external sources.)<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The oil market could be particularly affected by the conflict<\/strong>, with Fitch Solutions\u2019 research unit BMI saying in a webinar attended by EnterpriseAM that \u201call options are on the table\u201d both for the conflict and for its impact on oil prices in the near term. BMI laid out a number of possibilities for oil prices by 3Q:<\/p>\n<ol class=\"lst-kix_ulnh888qm2l4-0 start\" start=\"1\" style=\"padding:0;margin:0\">\n<li><strong>Iran conducts limited attacks and a new nuclear agreement<\/strong> <strong>is reached,<\/strong> which would lead to crude oil being priced at USD 60-65 per barrel;<\/li>\n<li><strong>Iran's missile programs are weakened and the US does not pursue a new nuclear agreement,<\/strong> which would lead to crude oil barrels being priced at USD 60-70 per barrel;<\/li>\n<li><strong>Israel and Iran engage in retaliationary strikes before eventual de-escalation,<\/strong> keeping prices elevated at USD 70 per barrel before stabilizing at between USD 60-80;<\/li>\n<li><strong>Retaliatory exchanges between Israel and Iran lead to military confrontation with the US,<\/strong> leading to prices of USD 75-100;<\/li>\n<li><strong>The situation develops into a broader conflict that pits the US directly against Iran,<\/strong> bringing prices up to around USD 100-150 should a closure of the Strait of Hormuz take place.<\/li>\n<\/ol>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Oil supply could remain stable in the next few months:<\/strong> \u201cSo long as oil exports of producers in the region remain unaffected, the global oil market is set to be well supplied over the next few months on the back of OPEC+\u2019s well-documented pivot towards a faster unwinding of voluntary output cuts,\u201d Capital Economics\u2019 James Swanston wrote in a research note seen by EnterpriseAM.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Where oil prices are trading currently:<\/strong> Brent Crude rose to a five-month high on Tuesday on speculations that the US might attack Iran, reaching USD 76 a barrel. Oil options volumes soared on Monday, with traders snapping up bullish Brent calls at USD 80 and USD 100. Brent\u2019s futures curve steepened into backwardation, suggesting fears of near-term supply shocks, especially if tensions escalate toward the Strait of Hormuz, through which 17 mn barrels per day of oil pass.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>As things stand, Gulf countries stand to benefit:<\/strong> \u201cThe Gulf economies benefit for the time being from higher production and oil prices. The greater negative impact will be felt on the economies of Egypt and Jordan,\u201d Swanston said. This notion was seconded by Fitch\u2019s Head of MENA Country Risk Ramona Moubarak, who said in the webinar that as long as the conflict remains confined to Iran and Israel, GCC economies will only be affected by the air of uncertainty, while benefiting from the higher oil prices.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The key determining factor will be the Strait of Hormuz:<\/strong> Iran following through on its threats to close the Strait of Hormuz could lead to the cutting off about 30% of the world\u2019s daily oil supply and 20% of global LNG trade, according to a <a target=\"_blank\" href=\"https:\/\/ent.news\/2025\/6\/633.pdf\" style=\"\" rel=\"noopener\">fact sheet (pdf)<\/a> detailing 2023 traffic through the Strait by the International Energy Agency. Closing the strait and cutting off key energy exporters Iran, Iraq, Kuwait, Saudi Arabia, and the UAE from the global market has the potential to completely disrupt global energy supply chains and violently ramp up energy costs. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>\u201cThe risk of a \u2018closure\u2019 of the Strait of Hormuz is more nuanced than some <\/strong><strong>might <\/strong><strong>sug<\/strong><strong>gest, <\/strong>not least because Iran relies on the Strait to export its energy flows,\u201d Swanston argued, adding that it seems unlikely Iran would cause long-term disruption to the Strait, given the implications not only for the West but for allies including China.<\/p>\n<p class=\"tag-border-left\">BEFORE THE WAR STARTED\u2026 <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>I<\/strong><strong>CAEW <\/strong><strong>had <\/strong><strong>seen th<\/strong><strong>e UAE\u2019s GDP growth pickin<\/strong><strong>g up to 5.1% in 2025<\/strong>, up from 3.8% last year, on the back of a \u201crebound in oil sector activity, in line with OPEC+ quota adjustments,\u201d the institute said in its <a target=\"_blank\" href=\"https:\/\/www.icaew.com\/technical\/economy\/business-confidence-monitor\/middle-east\" style=\"\" rel=\"noopener\">Economic Update report<\/a> \u2014 which was published before the escalation of the conflict between Iran and Israel. Accelerated OPEC+ production will help support oil sector growth of 6.1% this year, up from 4.8% previously, while non-oil growth is projected to average around 4.5% over the next few years. The UAE\u2019s tourism sector is also set to play a significant part in the UAE\u2019s non-oil growth, with the year set to see a 10.3% rise in tourist arrivals.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Inflation to remain elevated:<\/strong> The UAE\u2019s inflation reading is set to come in at 2.5% for 2025, making it the country with the highest expected inflation reading among the GCC, which is attributed to \u201congoing upward pressures from housing prices.\u201d<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Diversification progress to remain strong:<\/strong> \u201cBoth Saudi Arabia and the UAE are well placed to leverage the announced technology and AI agreements in line with the region's diversification objectives,\u201d the note reads.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The GCC at large is seen growing by 4.4% this year,<\/strong> representing an upgrade of 0.4 percentage point from previous forecasts, according to the report. The growth will be primarily driven by \u201cfaster OPEC+ output increases and sustained non-oil momentum in key economies like Saudi Arabia and the UAE,\" <a target=\"_blank\" href=\"https:\/\/www.zawya.com\/en\/economy\/gcc\/gcc-economies-buck-global-downturn-gdp-to-hit-44-in-2025-ovgm33q8\" style=\"\" rel=\"noopener\">Zawya<\/a> quotes ICAEW\u2019s Scott Livermore as saying. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Oil-sector growth will come in at a higher rate than previously expected:<\/strong> The larger output hikes announced by OPEC+ for May, June and July are expected to contribute to oil-sector growth of 4.6% in the GCC this year, up ICAEW\u2019s previous forecast of 3.2% of oil-sector growth. Meanwhile, non-energy sectors are also expected to grow \u2014 but at a slower pace than previously predicted, with the ICAEW revising its forecast down by 0.3 percentage point to 4.1% this year. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>How this compares to other forecasts:<\/strong> The World Bank sees the UAE\u2019s GDP growing 4.6% this year, while a Reuters poll of economists forecasted 4.5% growth. Meanwhile, the IMF is less optimistic with a 4% growth forecast. The CBUAE expects a stronger 4.7% GDP growth, while S&P Global had also previously forecast 5.1% growth this year.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economists are weighing different scenarios depending on both the intensity and the duration of the 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