Iran War Impact: Gulf Security & Financial Losses

Iranian missiles were suddenly falling next to shopping malls, luxury skyscrapers and ports filled with yachts, before the eyes of horrified Qataris, Emiratis, Kuwaitis, Bahrainis, Saudis and Omanis, as well as tens of thousands of expatriates and tourists.

The war has even reached some of the world’s most luxurious hotels. Debris from an intercepted Iranian drone fell on Dubai’s Burj al Arab, while the Fairmont The Palm on the artificial island of Palm Jumeirah received a direct impact.

And this Wednesday, Qatar’s national oil company claims to have suffered “considerable damage” due to missile attacks against the Ras Laffan industrial complex.

Ras Laffan was among the sites mentioned by Iran in a warning that it would take “decisive action”, after facilities at its South Pars gas field were reportedly hit by Israeli attacks.

The consequences are devastating, and the anger in Gulf capitals is immense.

A veritable tsunami of cancellations hit these rich monarchies: flights, hotel reservations, conferences and international events like Formula 1 in Bahrain and Saudi Arabia.

Added to this is the closure of the Strait of Hormuz, which has slowed their fuel exports.

“The Gulf countries have worked to build an image of safe havens in the Middle East. The actions and events of the last week have tarnished this image,” Badr al Saif, professor at Kuwait University and former deputy chief of staff to the Kuwaiti Prime Minister, told the BBC.

The region has invested in luxury and security.

The region’s monarchies, all autocracies, have invested heavily in surveillance, which has kept them relatively safe from terrorism, but they have also cracked down on dissent and anything that might harm their image

During these three weeks of war, for example, dozens of people were arrested – including foreigners – for posting videos of Iranian attacks.

In their attempt to attract expatriates, tourists and international investors, these conservative Muslim nations have created bubbles of permissiveness, but with limits: alcohol, yes, in certain places; public displays of homosexuality, no.

This, coupled with low or no taxes, has made them extremely popular in recent decades, also making them an important tourist destination.

But the war puts all these efforts to the test.

The tourism industry alone loses around $600 million per day in the region, according to data from the World Travel and Tourism Council, cited by the Financial Times.

This consortium predicted that tourism would bring $207 billion to the region this year.

The week of March 6, more than 80,000 short-term rental cancellations were recorded in Dubai, according to data collected by AirDNA Group from bookings made on platforms like Airbnb and Vrbo.

Flight cancellations have also grounded millions of passengers.

Over the past decades, the Gulf has become a true international hub for air connections, through which more than 500,000 passengers pass per day.

Since February 28, at least three airports – those in Dubai, Kuwait and Abu Dhabi – have been hit by Iranian missiles or drones, leading to the cancellation of thousands of flights.

The security image “was partly artificial, but also partly real, because the Gulf states had really managed to isolate themselves from the worst regional violence for decades,” Elham Fakhro, a researcher at the Belfer Center at Harvard’s Kennedy School, told BBC Mundo.

Restoring the confidence of investors and tourists “is possible”, believes Fakhro, “but it will depend on the duration of the conflict”.

The war with Iran, which has put the Gulf countries in the crosshairs, is proving extremely costly and generating a sense of anger and frustration among their citizens and leaders.

Perhaps the public figure who has most explicitly criticized Trump’s decision to drag them into war is Emirati billionaire businessman Khalaf Ahmad al Habtoor.

“Who gave him the authority to drag our region into a war with Iran? And what was his basis for making this dangerous decision?” al Habtoor asked in a recent and virulent open letter addressed to the American president, in which he wondered if he had “assessed the collateral damage before pulling the trigger”.

“The feeling of betrayal in the Gulf capitals is considerable, although it is unlikely that it will be expressed publicly for some time,” Elham Fakhro told BBC Mundo.

Gulf countries have invested heavily in their relationship with Washington, including hosting its military bases, facilitating logistics, committing to huge investments, and shouldering the internal political cost of aligning with deeply unpopular US regional policy.

“In return, they expected, at a minimum, to be consulted before a war that would inevitably make them targets. This was not the case. Iranian missiles hit their capitals, their airports, their oil infrastructure and their financial districts, not because of their own actions, but because of decisions taken in Washington and Tel Aviv,” Fakhro emphasizes.

Neil Quilliam, a researcher at Chatham House, a London-based research center, confirms that in Gulf capitals “tremendous anger” is being felt at the moment, although it is, for the moment, “unlikely that they will be able to do much, let alone express it in any public forum.”

This is not the first time that the United States has put them aside.

When the Iran nuclear deal was signed in 2015, “the Gulf countries, which had always demanded to participate in any pact with Tehran, were excluded”; this new sidelining therefore “touches a sensitive chord”.

The Gulf monarchies have had a tense relationship with their Persian neighbor since the revolution that overthrew Shah Reza Pahlavi and proclaimed the Islamic Republic of Iran.

Iran is not an Arab country, its population is predominantly Shiite – while the Gulf countries are predominantly Sunni – and, since the 1979 revolution, it has positioned itself as the great enemy of the United States in the region, of which the Arab monarchies are allied.

Thus, the Gulf countries have built their security strategy around this link with Washington, in particular Saudi Arabia, the United Arab Emirates and Qatar.

“They all sought, in one way or another, to obtain something akin to an equivalent of NATO Article 5 – the one which stipulates that if one member is attacked, the others will come to its defense – by which the United States would undertake to protect them”, analyzes Neil Quilliam.

The precedent of Kuwait in 1990 – invaded by Saddam Hussein’s Iraq then liberated by a coalition led by Washington – served as a reference.

But when Tehran bombed oil infrastructure in Saudi Arabia in 2019, or when Israel killed Hamas leaders in the Qatari capital, Doha, during a bombing in 2025, the United States stood idly by.

The feeling that Washington would not come to their aid grew, and some of these countries began to build their own defense industries and diversify their security partnerships.

According to Elham Fakhro, the Gulf countries had built their security around three closely related assumptions: that the United States would act as the main guarantor against external threats; that détente with Iran would reduce the risk of direct confrontation; and that, for some, establishing selective ties with Israel would bring strategic advantages.

These strategies “were intended to allow Gulf governments to maintain a balance between Washington, Tehran and Tel Aviv, without having to choose between them,” underlines the Belfer Center researcher.

The war waged by Iran has highlighted the limits of this alliance.

Some could choose to diversify their military cooperation with other countries such as Turkey or Pakistan; but, according to Neil Quilliam, “it will take them a long time to move away from the United States”, because many of these training, weapons systems or aviation contracts last at least twenty years.

What outcome do the Gulf countries have today in a war that they did not choose?

No easy solution, experts say. But the damage will be less significant if the conflict ends quickly.

A short-term ceasefire would help launch the recovery narrative, emphasizes Elham Fakhro.

But a prolonged war would worsen the damage month after month, accelerate the departure of expatriate workers and the flight of capital on which economies like Dubai’s depend.

That’s not all. The economic hemorrhage caused by the closure of the Strait of Hormuz for the Gulf countries can only be stopped in the long term by a ceasefire – never by force, as Trump wishes – believes Neil Quilliam.

In any case, the losses will be enormous, because some countries have had to interrupt their production, and it will take at least five or six months to restore it to pre-war levels.

Even if the war ended today, the threat of the Iranian regime – whose fall does not seem imminent – would continue to hang over the Gulf like a sword of Damocles.

“In two months, Israel could say that it has detected a movement in the nuclear program or in that of ballistic missiles and that it is resuming strikes,” envisages the Chatham House researcher. “And then the Iranians will fight back.”

As Anna Jacobs Khalaf of the European Institute of Peace points out, the Gulf countries “cannot change the geography”: they are neighbors of a vast country of 90 million inhabitants and “will have to find a way to coexist with the new Iranian leaders to prevent them from continuing to threaten their countries and global energy markets”.

A return to negotiation – as had been the case in recent years, when Saudi Arabia and Iran re-established diplomatic relations thanks to the mediation of China – could be a way out.

“The only lasting solution is for the Gulf states to build their own relations with Iran on their own terms,” said the Harvard researcher.