With the release of a special report by the Development Programme on the economic fallout of escalating tensions in the region, Abdallah Al Dardari, Assistant Secretary-General of the UN and Director of UNDP’s Regional Bureau for Arab States said the region is facing an “accelerating economic shock” hitting energy markets, growth, and livelihoods.
Speaking to Asharq Al-Awsat, he warned nearly 4 million people could fall into poverty within a month, calling it an unprecedented indicator of the economic toll of war.
Losses, he said, could rise rapidly if fighting continues, alongside shifts in energy routes, supply chains, and development models.
Estimates based on simulations
Al Dardari said the shock has been sharp and sudden, with losses expanding rapidly over a short period. Current estimates remain based on simulation models, as there has not been enough time to measure real impacts precisely.
The methodology draws on models used in past crises, including Gaza and Lebanon, which later proved highly accurate. The report focuses on broad trends rather than precise figures, particularly in GDP, to track the direction of economic impact.
Losses mounting
The report outlines wide-ranging effects, including declining trade, disruptions in petroleum flows, a worsening investment climate, and growing pressure on public finances.
“After four weeks of war, the impact is very large,” Al Dardari said.
“The Strait of Hormuz is closed, oil exports have been severely affected, and we are moving toward the worst-case scenario.”
He said production inputs have been severely disrupted and infrastructure has been damaged, pushing expected losses closer to $194 billion than $120 billion.
The scenarios are based on one month of fighting. If the conflict continues even one more week, losses would not rise incrementally but multiply, he warned.
GDP losses are highest in Gulf economies due to the hit to oil and energy, while poverty is expected to surge most in the Levant, where rising energy costs quickly drive up food prices.
“The number of poor could increase by around 4 million in a single month,” he said, noting such a jump would normally take years.
Energy routes shifting
Countries are scrambling to contain the shock, repair damage, and secure alternative supply lines.
Saudi Arabia is relying more on pipelines to Yanbu on the Red Sea, while Iraq and Syria are holding serious talks to move crude and petroleum products overland.
“This is a shift toward building alternatives and more diversified, resilient supply chains,” Al Dardari said, adding that the UNDP is supporting efforts to strengthen regional connectivity and trade routes.
Syria’s corridor role
On proposals to bypass the Strait of Hormuz through Syria, Al Dardari said the country has historically served as a regional transit hub linking trade routes.
He pointed to Syria’s “Five Seas” strategy in 2007–2008, which aimed to connect the Caspian, Black, Red, and Mediterranean seas, and the Arabian Gulf through pipelines, rail, roads, and energy grids.
At the time, the plan was backed by a comprehensive development strategy and relatively mature institutions. Today, however, regulatory and legal frameworks for cross-border investment remain underdeveloped, despite ongoing efforts to improve them.
He said the UNDP is ready to support countries in building the technical and institutional capacity needed to pursue such projects.
Opportunity amid crisis
Despite the downturn, Al Dardari said Syria, Jordan, and Lebanon have an opportunity to form a quasi-regional bloc and revive their role as a bridge linking Gulf economies with Türkiye and Europe through alternative supply chains.
But he cautioned this would require more than infrastructure, including stronger institutions, financial systems, and coordination across sectors and borders, as well as “regulatory convergence.”
Rethinking development
The crisis is also forcing a reassessment of development models.
“If 90% of oil and gas exports depend on the Strait of Hormuz, why were alternatives not developed?” he said, noting tensions in the region are not new.
He called for diversification of economies and labor markets, and deeper regional and global integration. While existing models delivered low poverty and strong growth, they have shown vulnerability to shocks.
“We face a more complex reality, with more shocks likely. We need more flexible and effective tools,” he said, adding that current strategies remain valid but may need more efficient pathways.
Rewriting reconstruction
Al Dardari said recovery in Gaza, Syria, and Lebanon can no longer rely on large external funding flows, shifting the burden to governments already facing rising poverty.
He questioned continued reliance on Gulf funding and called for innovative, sustainable recovery models.
The UNDP’s approach focuses on agriculture, local value chains, and affordable housing, drawing on global experience.
He said small and medium-sized enterprises offer a “sustainable alternative” due to their resilience, while strengthening education and healthcare is key to building a new social contract and stabilizing institutions.
