The long-term legacy of the war for the Gulf

The effects of the Iran war on the Gulf economies will last well beyond this year’s hit to GDP. The war is likely to incentivise efforts to raise oil supply – and not just via the Strait of Hormuz – which might eventually lead to lower energy prices than would otherwise be the case. Diversification efforts will need to be stepped up, but also re-thought. And, the UAE aside, the Gulf states’ diplomatic embrace of the US seen last year may become weaker – but we don’t think this means a shift towards close ties with China.