The Gulf Cooperation Council (GCC) states are confronting the greatest threat to their economic security and energy strategy since their formation. The economic fallout of the U.S.-Israeli war with Iran is severe, but uneven across the Gulf. So too is each state’s ability to sustain energy exports and protect critical infrastructure—both of which have been targeted unequally by Iran.
The war has produced the largest disruption to global oil and liquefied natural gas (LNG) supplies in modern history. Before February 28, roughly 20 percent of global oil and 20 percent of exported global LNG flowed through the Strait of Hormuz. Since then, traffic has dropped to around 5 percent of normal levels. Following Iran’s March 18 strike on Qatar’s Ras Laffan LNG facility—the largest of its kind in the world—Qatari exports have effectively halted. Even under optimistic assumptions, export capacity could remain at least 17 percent below pre-war levels for three to five years. Qatar Energy alone stands to lose roughly $20 billion annually—against a 2025 government revenue baseline of $54 billion.
Even if maritime traffic resumes, recovery will be difficult and slow. Oil production cannot simply be switched back on. Wells have been shut-in, and tanker loadings will require first drawing down storage, then moving to refined products, and gradually restarting oil production with the hope of minimal damage to existing reservoirs. A return to pre-war export levels, or normal energy revenues, will take months at best. For exporters without pipeline access, the disruption will be especially prolonged.
For Saudi Arabia and the United Arab Emirates, the ability to continue exporting crude through the East-West pipeline and the Habshan-Fujairah pipeline, respectively, has been a lifeline, preserving revenue streams and a degree of resilience. These infrastructure investments have been well worth their expense, but they are also not immune. As throughput approaches maximum capacity—around 7 million barrels per day in Saudi Arabia’s case—spare capacity disappears, and these routes themselves become potential targets for Iran or the Yemen-based Houthis.
Despite recent success in economic diversification efforts, oil revenues and oil market dynamics remain central to Gulf macroeconomic health. The shock is already spilling into non-oil industries. Tourism and aviation sectors in the GCC are likely to experience stress comparable to the COVID-19 pandemic. For Saudi Arabia, this is especially bad timing, as tourism generated $41 billion in 2024, exceeding petrochemical export revenues—at $39.7 billion—for the first time. In the UAE, logistics, trade finance, and connectivity—pillars of its economic model—face growing strain.
Market outlooks reflect this uncertainty. In more optimistic scenarios, partial recovery within six weeks could stabilize oil prices at an average of $83 per barrel for 2026. A more realistic outlook anticipates prolonged disruption through June, with oil prices spiking to $150 per barrel and averaging closer to $90 for the year. In either case, resilience will be uneven, with states able to maintain exports weathering the shock better than those forced offline.
Big Picture Realignments
The largest oil supply shock ever is likely to trigger a strategic reassessment of global energy security. Policymakers and markets alike will confront the structural risks of highly concentrated production and spare capacity, and vulnerable energy infrastructure in the Middle East. There will be new impulses to diversify energy resources, supply chains, investment partnerships, and to build resilience and redundancy into national energy strategies.
There are currently at least four competing frameworks of energy security within the global political economy, which will be affected by the energy disruption in the Gulf. Energy security is often defined by “the four A’s” of affordability, availability, accessibility, and acceptability—meaning it should be measured on cost and price stability, sufficiency of supply, infrastructure and delivery mechanisms, and its environmental and social impact. This traditional framework is being challenged by the Trump administration’s strategy of energy dominance, a national security-centered definition that prioritizes control over resources as an instrument of geopolitical and geoeconomic leverage. A third framework elevates climate imperatives, seeking to phase out fossil fuels. A fourth, emerging perspective views energy security as a “state of flows,” emphasizing open routes, interconnected systems, and uninterrupted movement of energy as the foundation of economic growth and development. As the head of Abu Dhabi’s National Oil Company, Sultan al Jaber, remarked at a March 2026 conference, “Stability in energy markets underpins stability in every market. Energy security is not just a slogan. It’s the difference between lights on and lights off. And it rests on a simple truth: the world’s critical arteries must remain open.”
These four frameworks have some obvious overlaps, but also some important points of conflict—particularly over questions of control, access, and the weaponization of supply. In the aftermath of the current crisis, and the reopening of the Strait of Hormuz, governments are likely to rebuild deeper strategic reserve levels, while markets insert a security premium into forward and futures prices. The economic effect is higher prices for longer.
The political consequences are more difficult to see. But fragmentation is more likely than coordination, and collective approaches—whether through climate agreements or shared infrastructure—may give way to more unilateral strategies. States will prioritize national economic security, potentially prohibiting the export of crude oil and refined products, incentivizing domestic resource consumption, or accelerating investment in renewable energy capacity. All this could change the energy system for decades to come.
One conclusion is already clear—the era of cheap assumptions about energy stability is over.
