According to BNP Paribas’ Stéphane ALBY, Gulf economies are currently absorbing a significant conflict-related shock, with oil exports via the Strait of Hormuz severely disrupted. Bahrain, Kuwait, and Qatar are identified as the hardest hit by these export disruptions, while Saudi Arabia and the United Arab Emirates (UAE) are able to partially bypass the Strait, though only for limited quantities [1]. The rise in global oil prices is expected to partially offset the decline in export volumes for Saudi Arabia and the UAE, providing some relief compared to their regional peers [1].
Despite these mitigating factors, the Gulf region’s heavy reliance on hydrocarbons means a contraction in regional Gross Domestic Product (GDP) is likely this year. Sectors such as tourism, transport, and real estate are expected to come under particular pressure due to the ongoing disruptions [1]. However, the report emphasizes that the Gulf’s strong macroeconomic fundamentals and large sovereign wealth funds provide a robust buffer, supporting the region’s resilience in the face of these shocks [1].
Looking ahead, the reopening of the Strait of Hormuz is described as 'key' to restoring normal export flows. In the immediate term, Gulf economies are expected to shift priorities towards supporting domestic stability, which may result in a slowdown in foreign investment. Heightened geopolitical risk is also likely to weigh on future foreign investment flows, despite the region’s underlying economic strength [1].
CONCLUSION
The Gulf region is facing a likely GDP contraction due to severe disruptions in oil exports via the Strait of Hormuz, with Bahrain, Kuwait, and Qatar most affected. However, strong macro fundamentals and sovereign wealth funds are expected to support resilience, even as foreign investment may slow amid ongoing geopolitical risks.