Written by The Banking Post
A prolonged military escalation in the Middle East could shrink regional economies by 3.7–6 percent of GDP, resulting in losses of $120–194 billion, according to a United Nations Development Programme (UNDP) assessment.
Titled “Military Escalation in the Middle East: Economic and Social Implications for the Arab States region”, the report warns that the damage could exceed the region’s total GDP growth recorded in 2025.
The study also projects severe labour market impacts, with unemployment rising by up to 4 percentage points — equivalent to 3.6 million job losses — and up to 4 million people pushed into poverty.
“This crisis rings alarm bells for countries of the region to fundamentally reevaluate their strategic choices,” said Abdallah Al Dardari, UN Assistant Secretary-General and Director of the Regional Bureau for Arab States at UNDP. He emphasized the need for stronger regional cooperation and economic diversification beyond hydrocarbon dependence.
Using computable general equilibrium modelling, the study examined multiple conflict scenarios, factoring in trade disruptions, productivity losses, and capital damage.
The report indicates uneven impacts across sub-regions: Gulf Cooperation Council countries and the Levant could see GDP losses of 5.2–8.5 percent, driven by trade disruptions and energy market volatility. Poverty increases are expected to be most severe in the Levant and least developed Arab states.
In the Levant alone, poverty could rise by 5 percent, pushing 3.3 million more people into hardship, accounting for over three-quarters of the region’s total projected increase.
Overall, the UNDP warns that human development could decline by 0.2–0.4 percent, potentially setting back progress by up to a year.
