Gulf economies face long-term hit from Iran conflict

An important development from the financial markets: Gulf economies face long-term hit from Iran conflict8 minutes ago Share Save Add as preferred on GoogleSameer HashmiBusiness reporter, DubaiAFP via Getty ImagesIran has attacked Gulf states in retaliation for Israeli and US bombing on its countryIn the early 1990s, Qatar was grappling with a period of economic strain - high debt levels and weak state revenues were weighing heavily on its finances. To try to transform its fortunes the small Gulf state made a decisive bet on natural gas. It would develop its vast offshore gas reserves, and – crucially – super chill the gas into LNG (liquified natural gas) for transportation by ship to countries around the world.

That decision led to the creation of Ras Laffan - an industrial city on the coast, about an hour's drive from the capital, Doha. Over the next three decades, it would become the world's largest LNG export centre, transforming Qatar into one of the richest countries globally. But on 18 March that success story was shaken.

Economic Details

United Arab Emirates to quit oil cartel OpecIn five charts: How UAE's exit could affect Opec's influence over the oil priceAn Iranian ballistic missile struck the main Ras Laffan gas complex, knocking out an estimated 17% of global LNG supply. The damage will cost state-owned QatarEnergy a predicted $20bn (£15bn) in lost annual revenues, while disrupting supplies to key markets in Asia, including China. Repairs could take between three to five years.

"The attack was a shock - both to global energy markets, but also to the Gulf states themselves, which are now feeling very vulnerable," says Karen Young, a senior research scholar at the Center on Global Energy Policy at Columbia University. QatarEnergy's chief executive Saad Al Kaabi said the scale of the damage had "set the region back by 10 to 20 years". The Iranian strike came after Israel bombed Iran's South Pars gas field, which borders Qatar's North Dome field.

Together they form the world's largest natural gas reserve. via Getty ImagesQatar has become one of the biggest exporters of natural gasAcross the Gulf the continuing conflict with Iran has caused up to $58bn of damage, according to one estimate. More than 80 facilities have been hit since the US and Israel launched strikes on Iran on 28 February, with over a third severely damaged, according to the International Energy Agency.

Analyst Views

Along with Qatar, damage has also been reported in Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates. It has pushed the region into a major economic shock. The World Bank has cut its growth forecast for the Middle East to 1.

8% this year, as a result of the war, warning the fallout could result in long-term "scarring". It previously estimated growth of 4% in 2026. The bank says Qatar and Kuwait will see the biggest contraction.

Meanwhile, Saudi Arabia and the UAE have shown more resilience primarily due to some oil exports that do not transit through the Strait of Hormuz that Iran has closed.

Financial markets are tracking the development closely as investors assess the likely impact.