As military tensions expand across the Middle East, global energy markets are once again entering a period of uncertainty, given the close link between stable oil supplies and geopolitical developments in the region.
Recent military and security developments related to Iran have nearly halted maritime traffic in the Strait of Hormuz. Meanwhile, Iranian missile attacks targeting Gulf countries—including strikes on oil facilities—have prompted these states to invoke force majeure clauses in contracts for the sale of oil and petroleum products.
On Tuesday, Saudi Aramco CEO Amin Nasser warned of the potential consequences of continued geopolitical tensions for global energy markets, stressing that prolonged instability could lead to serious disruptions in oil supplies and the stability of international markets.
Qatar, Kuwait, and Bahrain have already declared force majeure concerning oil production and sales.
Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait have reduced oil production by roughly one third, according to Bloomberg—equivalent to about 6.7 million barrels per day. According to the agency, the cuts vary among the countries but together they represent about 6 percent of total global production.
Bloomberg reports that Saudi Arabia has reduced production by between 2 and 2.5 million barrels per day, while production cuts in the UAE range from 500,000 to 850,000 barrels per day. Kuwait has also reduced output by about 500,000 barrels per day, while Iraq’s reduction has reached approximately 2.9 million barrels per day.
Against this backdrop, Gulf states now face a complex equation: maintaining energy flows to global markets while simultaneously protecting their domestic economies from the consequences of escalating regional conflict.
Force Majeure
A few days ago, Qatar’s Minister of State for Energy Affairs and CEO of Qatar Energy, Saad Sherida Al-Kaabi, warned that if the war continues for several more weeks, all Gulf exporters could be forced to declare force majeure.
Emirati economist Hussein Al-Qamzi explains that in the energy sector, the concept of force majeure refers to an oil company or exporting authority declaring the occurrence of extraordinary circumstances beyond its control—such as war, disrupted transport routes, or the inability to ship cargo—preventing it from fulfilling contractual obligations regarding quantities or delivery schedules.
Speaking to Alhurra, he emphasized that such a declaration does not mean companies are bankrupt or financially collapsing. Rather, it reflects the temporary suspension or adjustment of certain contractual obligations due to exceptional circumstances.
However, such declarations typically have sharp repercussions for oil markets. They send a negative signal that supply can no longer be fully guaranteed and that deliveries may face logistical complications, increasing costs and fueling price volatility.
Some signs of this situation have already begun to emerge following Kuwait’s declaration of force majeure and production cuts, alongside similar precautionary measures by other companies.
Al-Qamzi notes that rising oil prices under such circumstances do not necessarily represent a gain for Gulf economies.
“While the nominal price of oil may rise,” he said, “declining export volumes and disruptions to economic sectors linked to trade, transportation, services, and insurance can put pressure on non-oil revenues. As a result, higher prices—if exports are disrupted—may provide only partial compensation for the loss of production and broader economic activity.”
Gulf Economic Security
At present, it remains impossible to predict when U.S. and Israeli strikes against Iran—and Iran’s retaliatory attacks against Israel and Gulf states—will come to an end.
U.S. Defense Secretary Pete Hegseth said this week that the United States has “only just begun fighting,” stressing that military operations will continue until a decisive defeat is inflicted on Iran.
These statements come despite comments from Donald Trump on Monday expressing hope for a swift end to the war, saying the military mission had already achieved most of its objectives ahead of schedule.
This raises a central question: How are Gulf states preparing to protect their economies and preserve the levels of prosperity their societies have become accustomed to amid rising security risks?
Saudi economist Jamal Banoun told Alhurra that Gulf economies are facing one of their most difficult tests in decades.
He noted that Iranian strikes targeting vital infrastructure—including Dubai International Airport and Jebel Ali Port—represent a direct threat to the economic model that has driven the region’s rise.
“This model, based on openness, stability, and attracting capital through tourism and global trade, is now under direct pressure that threatens its foundations,” Banoun said. “With three of the world’s largest airports and the region’s most important ports concentrated in a narrow geographic area, the impact of these strikes is significant. The scenario of their simultaneous closure would set a dangerous precedent in global trade.”
Banoun also pointed out that Gulf states possess sovereign assets and reserves exceeding 5 trillion dollars, giving them some room to maneuver. However, he noted that the war has revealed certain vulnerabilities, most notably the concentration of critical infrastructure and the region’s reliance on importing between 80 and 90 percent of its food needs.
For his part, Al-Qamzi believes that Gulf economies entered this war with a degree of resilience, supported by large financial reserves and well-capitalized, highly liquid banking systems.
Nevertheless, he stressed that the conflict is already putting pressure on key sectors such as shipping, insurance, and energy. Economic stability remains intact for now, but it depends heavily on governments’ ability to manage crises and intervene when necessary.
Strengths and Vulnerabilities
Al-Qamzi highlights several strengths that characterize Gulf economies, including diversification, strong financial systems, and sovereign wealth funds.
However, he also stresses that Gulf economies remain highly sensitive to the safety of maritime shipping routes, air transport, and international insurance markets.
“Even countries with alternative export routes—such as Saudi Arabia via the East-West pipeline—do not have a complete substitute capable of replacing the export volumes that normally pass through the Gulf,” he said. “This means the region, despite its financial strength, still faces a highly sensitive geographic and logistical bottleneck.”
From this perspective, Al-Qamzi proposes building a joint Gulf risk-management system, including establishing shared strategic reserves for key commodities, enhancing coordination in maritime and air transport, developing unified protocols to ensure business continuity during emergencies, and expanding cooperation among central banks and regulatory authorities.
Until such measures are implemented, the outlook remains uncertain.
A recent report by Fitch Ratings stated that energy-exporting countries, including some Gulf states, may temporarily benefit from higher oil prices. The strength of Gulf banks, particularly in terms of capital and liquidity, also provides a degree of resilience against shocks.
However, Fitch warned that a prolonged war or damage to energy infrastructure could later place pressure on fiscal conditions and sovereign credit ratings in the region.
Banoun, for his part, believes the current war requires serious thinking about a collective Gulf approach to economic security.
“This war has created political will supported by a shared sense of danger among Gulf states and a growing awareness of collective vulnerability,” he said.
He called for establishing joint Gulf food and energy reserve systems distributed geographically, as well as developing a Gulf protocol for coordination during economic and defense emergencies.
The article is a translation of the original Arabic.
Sakina Abdallah
A Saudi writer, researcher, and TV presenter
