Octrado: The War Has Sent the Gulf Cooperation Council into Recession

PROVIDENCE, Seychelles, June 25, 2026 /PRNewswire/ -- The countries surrounding the Persian Gulf undoubtedly suffered the greatest economic damage from the war against Iran, which began four months ago. Broker Octrado has analysed the available macroeconomic data on the Gulf Cooperation Council to identify the hardest-hit areas of its members' economies and to assess the implications for both regional and global economic development in 2026.

The Gulf Cooperation Council (GCC) is a political, economic, and intergovernmental union comprising six Arab nations bordering the Persian Gulf: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Established in 1981, the GCC has primary goals that include economic integration, collective security, and unified regulations across trade, tourism, and legislation. The GCC has established a Gulf Common Market to allow citizens of member states to move, reside, and work freely across all six countries, and works toward standardising customs, financial regulations, and tax systems — including the introduction of VAT.

Since the war began in late February, the World Bank has downgraded its 2026 GDP growth forecast for the entire region from 4.4% to just 1.3%. More pessimistic outlooks also exist. The Oxford Economics think tank, for instance, predicts that some GCC economies will enter recession in the second half of 2026. Having previously forecast GDP growth of 4.6%, Oxford Economics now projects a GDP decline of 0.2%, as Qatar, Kuwait, Bahrain, and the UAE face significant downgrades due to their inability to reroute hydrocarbon exports — meaning production will need to shut down once storage facilities reach capacity.

According to Oxford Economics, strikes on Qatar's LNG infrastructure at Ras Laffan on 18 March damaged 17–20% of the country's production capacity. Restoration is estimated to take three to five years, costing Qatar $20 billion in lost revenue annually.

By contrast, Oman and Saudi Arabia are less reliant on the Strait of Hormuz and can therefore maintain healthier export levels. Oxford Economics also anticipates a prolonged negative impact on tourism and domestic demand — one that will outlast the conflict itself and from which the sector will take considerable time to recover. The pace of recovery will depend on the level of security the GCC achieves once the war ends.

GCC countries were well aware of their dependency on hydrocarbons and had adopted strategies to diversify their economies away from these commodities. Those strategies bore fruit: tourism and aviation emerged as two central pillars of diversification, with GCC states investing heavily in both sectors. The Gulf became home to some of the world's busiest international airport hubs.

The US–Iran conflict has exposed just how fragile these industries can be. The rating agency Moody's recently suggested that hotel occupancy in Dubai is set to plummet to 10% in the second quarter of 2026, down from 80% before the war.

The conflict has also placed Gulf carriers such as Emirates, Etihad, and Qatar Airways under increasing financial pressure. More than 30,000 flights to the Middle East were cancelled in the first month of the war, and jet fuel prices — the largest variable cost for airlines — are up 90% on the annual average.

The UAE and Qatar also serve as major air freight hubs, bridging cargo flows between Asia and Europe. This too has been disrupted. Freight rates have risen by 70% on certain routes following attacks on Dubai and Doha that resulted in grounded flights and airspace closures.

In the longer term, the war's economic impact on the Gulf will hinge on its duration and political outcome — but the risks are firmly tilted to the downside. According to Octrado, the fiscal outlook for GCC states is deteriorating, with several facing scenarios in which government spending exceeds revenue. Public-sector debt is rising in a number of member states as well.

The Gulf's loss of "safe-haven" status and the resulting reputational damage will not be easily reversed. Even after the war ends, higher risk premiums are likely to persist for businesses operating in the region. Shipping disruptions could take months to unwind, and a prolonged closure of the Strait of Hormuz could trigger permanent — or at least long-lasting — trade rerouting. Should the conflict drag on, structural shifts in global supply chains may deepen further, with lasting costs for Gulf economies.

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