Arab economies could suffer losses of up to $194 billion due to the ongoing war involving Iran, according to a new study by the United Nations Development Programme (UNDP). The report highlights that even a limited-scale conflict is capable of triggering widespread economic instability across the region.
The assessment, released on Tuesday, examines the impact of a four-week conflict that began in late February 2026. It projects that economic output across Arab states could shrink between 3.7% and 6%, driven by disruptions in trade, energy supply, and financial systems.
The report warns that growing uncertainty may significantly deter investment, while rising transportation costs and maritime disruptions could severely impact import-export activities. Shipping routes, particularly those passing through strategic chokepoints, have already faced interruptions, increasing global supply chain pressure.
UNDP estimates that if the conflict intensifies, an additional 4 million people could fall below the poverty line. Between 2.5 million and 3.5 million jobs are also at risk, with low-skilled workers expected to be the most affected. Unemployment among this group could rise by as much as 4.5%.
Fragile regions, including the Levant as well as countries like Sudan and Yemen, are expected to bear the brunt of the crisis. Meanwhile, inflationary pressures are rising sharply in import-dependent economies due to disruptions in energy flows and maritime trade.
The report adds that although some oil-exporting countries in North Africa may benefit from higher global oil prices, the overall regional outlook remains grim. Human development indicators across several countries could be set back by at least a year.
The conflict began on February 28, when joint military operations were launched by the United States and Israel targeting Iran. Thousands of casualties have been reported, including senior Iranian leadership figures. In retaliation, Iran has carried out drone and missile strikes targeting Israel, Jordan, Iraq, and U.S. military bases in the Gulf region.
Iran has also closed the strategically vital Strait of Hormuz to countries supporting its adversaries. Several oil tankers have reportedly been attacked while attempting to navigate the route without authorization from Tehran, further disrupting global energy markets and international aviation routes.
The UNDP concludes that without immediate de-escalation, the economic and humanitarian consequences for the Arab world could deepen significantly in the coming months.
