Kuwaiti economist Jassim Al-Saadoun has warned of profound economic repercussions from the ongoing war in the region, explaining that the increasing American debt and the worsening imbalances in the global economy are among the drivers of escalation. Meanwhile, the closure of the Strait of Hormuz represents a direct threat to the economies of the Gulf and the world.
In an episode of the program "The Interview," Al-Saadoun, who serves as the chairman of the board at Shal Consulting Group, provided an analytical reading linking the troubled economic context to the outbreak of war, emphasizing that the world, already affected by the COVID-19 pandemic and the Ukraine war, has become more vulnerable to new shocks.
Details of the Event
Al-Saadoun explained that major economic crises throughout history are resolved by the balance between "management and resources," noting that mismanagement was a key factor in deepening the Great Depression. In contrast, international coordination helped contain the 2008 crisis relatively quickly, which is clearly lacking today.
He pointed out that the current environment is closer to the 1930s, characterized by a sharp discord among major powers, with declining cooperation and escalating competition, raising the cost of any potential crisis and making its outcomes more dangerous and complex.
Context and Background
Al-Saadoun believes that the United States entered the war under uncomfortable economic conditions, primarily highlighted by the public debt, which surged from about $10 trillion in 2008 to nearly $39 trillion today, with an unprecedented acceleration in borrowing.
This debt represents the "tent pole" of the American economy, as Washington increasingly relies on issuing bonds and financing spending through printing dollars, making any shake in confidence in the American currency a direct threat to global economic stability.
Consequences and Impact
He added that recent crises, particularly the COVID-19 pandemic and the Ukrainian war, have pushed the United States to increase its debt by about $10 trillion in a short period, reflecting a structural imbalance between spending and production, placing the American economy under increasing pressure.
In contrast, he noted that China was in a relatively better economic position before the war, focusing its resources on domestic growth and investment, while expanding its influence through the Belt and Road Initiative, which gives it a greater capacity to absorb shocks compared to Washington.
Impact on the Arab Region
Al-Saadoun sees competition for energy resources as one of the strategic drivers of conflict, as control over oil and gas reserves means possessing crucial leverage in the international system, especially with the increasing global demand for energy amid technological transformation.
He referred to the Strait of Hormuz as the "bottleneck" of the global economy, explaining that about half of Asia's oil needs pass through it, making any disruption to its flow impactful on supply chains and energy and food prices simultaneously.
He emphasized that closing the strait does not only harm exporters and importers, but its effects extend to the United States itself, as rising oil prices increase fuel costs for American consumers, without the profits of oil companies directly benefiting society.
Moreover, he added that the impact is not limited to energy but also includes fertilizers and industrial materials that pass through the Gulf, threatening global agricultural production and raising food prices, especially in poor countries that spend a higher proportion of their income on food.
Regarding Gulf countries, Al-Saadoun warned of significant economic losses if the closure of the Strait of Hormuz continues, pointing out that some countries like Kuwait and Qatar rely entirely on the strait for their exports, making them the most vulnerable to the impact.
He explained that estimates indicate a potential decline in the GDP of these countries by significant percentages, which could lead to double losses when accounting for expected growth before the war, while Saudi Arabia and the UAE are relatively less affected due to the presence of alternative export outlets.
He noted that rising oil prices would not compensate for these losses, as production disruptions and damage to facilities require a long time to recover, in addition to the fact that export operations themselves may stop or sharply decline during the crisis.
Furthermore, he stated that the losses are not limited to GDP but extend to the labor market, investment, and consumption, with expectations of losing millions of jobs and a decline in economic activity in the region, especially if the war drags on.
In analyzing Iran's behavior, Al-Saadoun said that its targeting of the Strait of Hormuz falls within the strategy of "energy warfare" aimed at creating a global economic shock that pressures its adversaries, which has been partially achieved through rising prices and declining popularity of the American administration.
However, he believes that Tehran made a strategic error by targeting Gulf countries, which weakened international sympathy for it, and it could have achieved its goals through economic pressure alone without expanding the confrontation.
He pointed out that the continuation of the crisis could push the global economy towards "stagflation," combining slow growth and rising prices, which is the most dangerous scenario as it restricts governments' ability to address issues through monetary policies.
In this context, he noted that raising interest rates to combat inflation will increase the burden of servicing American debt, placing Washington in a difficult equation between containing inflation and avoiding a deeper debt crisis.
On the level of the international system, Al-Saadoun stated that what is happening could reshape the balance of power, indicating that the rules of engagement have changed with the evolution of military technology, which could reduce the superiority of conventional weapons and provide weaker parties with greater tools of influence.
He stressed that Gulf countries need to review their strategies by enhancing economic and political integration and developing alternatives for energy transportation away from sensitive straits to reduce their exposure to geopolitical shocks.
He also called for rationality and de-escalation, warning that the continuation of the war will lead to losses far exceeding any potential gains, and could push the global economy into a deeper crisis than anything seen in recent decades.