The United Nations Economic and Social Commission for Western Asia (ESCWA) said the war between the United States and Iran has inflicted an estimated $150 billion in economic losses on Arab economies in its first month, warning that disruptions to key maritime routes are threatening regional stability and global supply chains.
Rania Al-Mashat, United Nations Under-Secretary-General and Executive Secretary of ESCWA, presented the assessment during an informal UN Security Council meeting hosted by Bahrain on Thursday. The meeting, titled “Safe Seas, Shared Security: Protecting Freedom of Navigation in a Changing Security Environment,” focused on the growing security risks across the Gulf and Red Sea.
Al-Mashat said the estimated losses are equivalent to about 4 percent of the combined gross domestic product of Arab countries, highlighting the economic cost of escalating military tensions around the Strait of Hormuz and the Red Sea.
She warned that threats to shipping lanes extend far beyond military security, affecting economic development, food supplies, energy markets, trade, investment and the livelihoods of millions of people across the Middle East and beyond.
“From the Arabian Gulf and the Strait of Hormuz to the Red Sea and Bab al-Mandab, these waterways form an interconnected network for transporting energy, food and goods to global markets,” Al-Mashat said, according to ESCWA. “Disruption in one part of this network affects ports, markets, households and economies far beyond the immediate conflict zone.”
Maritime disruptions raise costs across the region
ESCWA said the economic impact begins even before a waterway is formally closed. When shipping companies and insurers judge a route to be too risky, commercial traffic declines and insurance premiums and freight costs increase, with the additional costs ultimately passed on to consumers.
Before the conflict escalated earlier this year, about 25 percent of global seaborne oil trade and roughly 19 percent of global liquefied natural gas (LNG) trade passed through the Strait of Hormuz. Gulf Cooperation Council countries also account for between 20 and 40 percent of global exports of products including ammonia, fertilizers, sulfur and aluminum.
Al-Mashat said alternative shipping routes do not necessarily eliminate the problem, warning that bottlenecks can simply shift from strategic straits to ports, pipelines or inland transport corridors.
ESCWA identified small and medium-sized enterprises (SMEs) as among the most vulnerable sectors. These businesses make up the majority of enterprises across the Arab world but have limited capacity to absorb higher transportation, energy and insurance costs or quickly diversify suppliers and markets.
The commission said rising logistics and fuel costs are reducing profit margins, slowing production and putting jobs at risk across multiple sectors.
Al-Mashat noted that nine of the Arab world’s 22 countries were already experiencing conflict or post-conflict recovery before the latest escalation. Damaged infrastructure, weak institutions, limited fiscal resources and dependence on imported food and fuel have made those countries especially vulnerable to rising commodity and transport prices.
She also warned that attacks targeting oil infrastructure and shipping routes in the Red Sea have increased pressure on Saudi Arabia and placed the region’s two principal energy export corridors — the Strait of Hormuz and Bab al-Mandab, under heightened threat.
ESCWA announced the creation of a regional task force on transport, logistics and supply chains to strengthen coordination among Arab states during crises.
The initiative will focus on early-warning systems, emergency operations centers and regional coordination mechanisms designed to keep essential goods and humanitarian supplies moving during periods of conflict.
