The US-Israeli war on Iran could shrink Arab economies by up to six percent and push millions into poverty, the United Nations Development Programme (UNDP) has said in a new assessment.
The study, published early Tuesday, models the impact of a four-week conflict beginning in late February 2026, warning that even a limited escalation can trigger widespread regional fallout through trade, energy and financial channels.
Economic output across Arab states is projected to contract by between 3.7 and 6.0 percent, equivalent to losses of $120 billion to $194 billion, the study said.
Investment is expected to fall sharply amid rising uncertainty, while exports and imports decline due to disruptions in shipping and higher transport costs.
The study also found that nearly four million additional people could be pushed into poverty under high-intensity scenarios, with the sharpest increases in the Levant and fragile countries, including Sudan and Yemen.
Unemployment is also set to rise, with an estimated 2.5 to 3.5 million additional people losing jobs. Lower-skilled workers are expected to be hardest hit, with unemployment rising by up to 4.5 percentage points.
The largest economic losses
The economic shock is being driven largely by disruptions to maritime trade and energy flows, which have increased costs and fueled inflation, particularly in import-dependent economies.
Impacts vary across subregions. The Gulf and Levant are expected to bear the largest economic losses, while North Africa may see more mixed effects, with some oil exporters benefiting from higher energy prices.
Human development is projected to decline, reversing up to a year of progress in some countries, the assessment said.
The report warns that declining government revenues and widening fiscal deficits could further limit the ability of states to respond to the crisis.
The US and Israel have launched a joint war on Iran since February 28, killing so far over 1,340 people, including then-Supreme Leader Ali Khamenei.
Iran has retaliated with drone and missile strikes targeting Israel, along with Jordan, Iraq, and Gulf countries hosting US military assets, causing casualties and damage to infrastructure while disrupting global markets and aviation.
Iranian authorities have also shut the Strait of Hormuz to vessels linked to the US, Israel, and countries supporting aggression against Tehran. During the conflict, several tankers were attacked for passing through the strait without Tehran’s permission.
