Phoenix 24
Higher crude prices are no longer enough to protect energy exporters.
Dubai, United Arab Emirates
The Gulf economies are facing an unusual economic reversal: oil prices are high, yet growth is contracting. The World Bank now projects the economies of the Gulf Cooperation Council to shrink by 4.3 percent in 2026 as the war involving Iran disrupts production, trade, aviation and logistics across the region. The broader Middle East, North Africa, Afghanistan and Pakistan region is also expected to contract after expanding in 2025. The shock demonstrates that high commodity prices cannot compensate when the infrastructure required to export those commodities is itself under pressure.
The Strait of Hormuz sits at the center of that disruption. Before the conflict, Gulf oil production averaged about 26 million barrels per day, but output later fell sharply before beginning a partial recovery. Saudi Arabia and Iraq experienced some of the largest absolute reductions. The result has overturned the traditional logic of an oil shock, in which higher prices normally strengthen exporters while weakening import-dependent economies.
This time, geography is working against the producers. Gulf states may possess vast hydrocarbon reserves, but their ability to monetize those resources depends on secure maritime corridors, functioning ports, predictable insurance costs and reliable logistics. A barrel priced above previous expectations creates little advantage if production is constrained or shipping becomes more dangerous. Energy wealth therefore becomes vulnerable when transportation itself becomes part of the battlefield.
The consequences are spreading beyond oil. Tourism, aviation, logistics, financial markets and business confidence are all absorbing the effects of uncertainty. Gulf economies have spent years attempting to diversify through infrastructure, tourism, technology and financial services, but many of those sectors also depend heavily on regional stability. War therefore attacks diversification from another direction, weakening precisely the non-oil activities designed to reduce dependence on hydrocarbons.
The World Bank’s assessment also highlights a paradox. Some oil-importing economies in the wider region have shown greater resilience than Gulf exporters despite facing higher energy and food costs. That does not mean they are insulated from the crisis, but it shows how this conflict has altered the usual distribution of winners and losers from rising oil prices.
The strategic lesson is broader than the Gulf. Natural resources create power only when states can extract, transport, finance and sell them reliably. The current crisis shows that control over routes, ports and chokepoints can matter as much as control over the resources themselves.
Energy wealth loses its advantage when geography becomes a weapon.