The United Nations Development Programme (UNDP) warned today, Tuesday, that the ongoing US-Israeli war on Iran, which has entered its fifth week, could lead to economic losses for Arab economies ranging from 3.7% to 6% of their GDP. These losses are estimated to be between $120 billion and $194 billion, surpassing the cumulative economic growth achieved by the region during the year 2025.
In an assessment titled "Military Escalation in the Middle East: Economic and Social Implications for Arab States," the programme indicated that this setback could raise unemployment rates by as much as 4 percentage points, resulting in the loss of approximately 3.6 million jobs, a number that exceeds the total jobs created in the region during the year 2025. The war could also push an additional 4 million people to the poverty threshold.
Details of the Event
The UNDP clarified that the assessment reveals a structural fragility in the region's economies, making even short military escalations capable of causing deep economic and social impacts that may persist in the long term. Abdullah Dardari, the UN Assistant Secretary-General and Director of the Regional Office for Arab States at the programme, stated that the crisis sounds the "alarm bell" for countries in the region to reassess their strategic options in financial and social policies.
Dardari added that the findings underscore the need to enhance regional cooperation to diversify economies away from hydrocarbon-driven growth, expand productive bases, and secure trade and logistics services.
Background & Context
The assessment relied on a model measuring the scale of disruptions resulting from a conflict lasting 4 weeks, through channels including rising trade costs and temporary productivity losses. The UN programme also constructed 5 scenarios ranging from "moderate disruption," where trade costs increase by 10 times, to "severe disruption," where these costs rise by 100 times, coinciding with a halt in hydrocarbon production.
The UNDP noted that the losses would not be evenly distributed among regions within the Arab world, with the largest total economic losses concentrated in the Gulf Cooperation Council (GCC) countries and the Mashreq countries. The Gulf is expected to lose between 5.2% and 8.5% of its GDP, while the Mashreq is expected to lose between 5.2% and 8.7%.
Impact & Consequences
Reports anticipate that increases in poverty will be concentrated in the Mashreq and the least developed Arab countries, where basic vulnerability levels rise, and shocks are reflected more severely on welfare. In the Mashreq alone, the programme expects poverty to rise by about 5%, pushing between 2.85 million and 3.30 million additional people into poverty, representing more than 75% of the total expected increase in poverty across the region.
The UNDP also expects a decline in human development in the region, according to the Human Development Index, by about 0.2% to 0.4%, equivalent to a setback of between half a year and a full year of developmental progress.
Regional Significance
The effects of this war manifest in the deterioration of economic and social conditions in the Arab region, necessitating a swift response from governments to enhance economic and social stability. Under these circumstances, strengthening regional cooperation and developing new strategies becomes an urgent necessity to confront the increasing challenges.
In conclusion, this crisis stands out as a clear warning to countries in the region to rethink their economic and social policies and work towards building more resilient economies capable of facing future crises.