Middle East faces rapid economic squeeze from Hormuz crisis, UN warns

Residents across the Middle East face a sharp escalation in living expenses and rapid economic shifts due to the confrontation in the Strait of Hormuz and hostilities involving Iran, according to a senior United Nations official.

Abdullah Al Dardari, who leads the Arab States bureau at the UN Development Programme, told The National that regional populations must brace for increased taxation, rising consumer prices, and shrinking state welfare subsidies. Speaking on the sidelines of the Manama Dialogue in Bahrain, he observed that socioeconomic reorganizations that would typically unfold over generations are now being compressed into mere months as administrations grapple with reconstruction costs and shipping disruptions.

The waterway standoff, characterized by dual restrictions enforced by Tehran and Washington, has curtailed transit through a maritime corridor normally responsible for one-fourth of global cargo transport. Al Dardari noted that prolonged reliance on Hormuz left governments vulnerable. The wider shock wiped out seven percent of regional gross domestic product, effectively erasing all economic expansion recorded during 2025.

While the energy supply disruption surpassed past crises such as the 1974 embargo and both Gulf conflicts, its market and pricing fallout has been comparatively tempered, according to assessments from the International Monetary Fund. Nonetheless, the resulting fallout has created what Al Dardari described as a "rich but fragile" bracket of nations. Although these states possess stronger capital reserves than deeply impoverished neighbours such as Syria and Lebanon, they are increasingly reserving funds for their own rehabilitation rather than dispensing financial aid elsewhere.

United Nations figures indicate that the ongoing hostilities have already plunged four million individuals into poverty and rendered an equal number jobless across the region. Renewed confrontation risks exacerbating these figures significantly. Washington has cautioned citizens against travel throughout most regional destinations and recalled personnel from locations including Saudi Arabia following ongoing Houthi strikes, even as United States President Donald Trump asserted the conflict would finish shortly.

In response to transit bottlenecks, Gulf nations, the European Union, and Turkey have engaged in talks to establish alternative trade routes and boost regional logistics. At the same time, Al Dardari pointed out that long-term stabilization remains linked to the Palestinian territories. He noted that the devastation in Gaza, where Israeli operations have claimed 74,000 lives and left four-fifths of the enclave ruined, fundamentally altered the region even prior to the latest clash with Iran.