Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?

Palestinian civilians in Gaza have seen their homes devastated, main, since the Israel-Hamas conflict began on Oct. 7, which now threatens to drag troubled Arab states including Syria, bottom left, Lebanon, bottom, and Iraq, right, into a wider regional war. (AFP)
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Updated 24 October 2023
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Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?

  • Bulk of impact expected to be felt by economies already grappling with crises, notably Syria, Lebanon and Iraq
  • Geographical distance from the war zone potentially offers room for maneuver for some Arab countries

LONDON: Western media may be warning of “drastic implications” for the global economy should the conflict in Gaza spill over into neighboring countries, but Middle East analysts predict that the economic brunt of a wider conflagration will be borne by crisis-ridden regional countries.

A number of developments are being seen as an omen of things to come. From Lebanon, Hezbollah and allied Palestinian factions have been trading daily cross-border fire with Israel. A US Navy ship has intercepted missiles launched by the Houthi militia in Yemen. Two American bases in Syria have come under fire. And in Iraq, drones and rockets have fired at US forces.

Several countries, including Saudi Arabia, Kuwait, the US, the UK, Germany, France and Canada, have encouraged their nationals to avoid travel to Lebanon or leave while flights remain available.

Forecasting a 60-percent chance of “prolonged conflict” and the potential for the “increasing involvement” of regional actors, including Iran-backed militias, Ali Metwally, a London-based expert, says the economies of Iraq, Lebanon and Syria are most at risk.

“If Hezbollah were to enter into a conflict with Israel, Lebanon would likely suffer significant economic consequences due to its close association with the group and the potential for direct military engagement,” he told Arab News.




 Palestinian girl carries a blankets as she walks past the site of a deadly explosion at al-Ahli hospital, in Gaza City. (AFP)

Lebanon’s tourism and hospitality sectors, major contributors to its service-oriented economy, would suffer the most while its supply chains would face disruption from “any damage to or closure of the port of Beirut,” causing “shortages of essential goods” and “fueling the current hyperinflation.”

Given the financial collapse of 2019 and the resulting paralysis suffered by Lebanese banks, Metwally speculated that any further shocks would only serve to scare off the remaining depositors and investors.

Similarly, Syria, which has been a proxy battleground since the onset of civil war in 2011, has endured high input costs and inflation rates, fuel and medicine shortages, a collapsed currency, devastated infrastructure, and water scarcity for the better part of a decade.

This, according to the UN, has left more than 90 percent of the population below the poverty line and 15 million Syrians in need of humanitarian assistance. Ongoing EU and US sanctions — which also limit the capacity for even those governments that have restored diplomatic ties with Syria to invest in its reconstruction — have only served to exacerbate this.

Were a wider conflict to be introduced into this mix, Metwally said, vital aid flows may be cut off because of a “possibility that the international community would redirect aid efforts from rebuilding and stabilizing Syria to addressing the new conflict, leaving the country with fewer resources for post-war reconstruction.”

Metwally’s concerns are echoed by Ammar Abdulhamid, a US-based political analyst, who said that a wider war “means that the two countries — Syria and Lebanon — will become battlegrounds, and whatever leadership exists in both countries will be decimated. The two states will collapse as such, not just their economies.”




From Lebanon, Hezbollah and allied Palestinian factions have been trading daily cross-border fire with Israel. (AFP)

Noting the likelihood of various Iraqi militias and groups taking sides in any ensuing crisis, Metwally pointed out that the country has no shortage of internal strife, with “sectarian tensions” a continuing concern.

Since “Iraq is heavily reliant on the oil sector in revenue generation and employment, higher security concerns could lead to attacks on oil infrastructure or hinder the movement of oil through critical shipping routes, lowering Iraq’s oil revenue and widening the fiscal deficit of the country after a decent period of surplus.”

Considering all it has been through, Iraq has found a degree of stability unprecedented in the last two decades, and the economy has been gradually recovering since 2021, according to a World Bank report.

INNUMBERS

• $270.36bn Iraq’s GDP (2022).

• $22.4bn Syria’s GDP (2019).

• $20.48bn Lebanon’s GDP (2021).

Source: Statista

In 2022, it earned approximately $115 billion in oil revenues, thanks to a rise in energy prices in the wake of Russia’s war on Ukraine and consequent Western sanctions on Russia. Buoyed by this oil bonanza, the Iraqi government allocated $153 billion for the 2023 budget.

While Abdulhamid thinks Iraq’s geographical distance from Palestine potentially offers it “some room to maneuver,” Metwally remains concerned that “any diversion” of financial resources to address security issues could strain the government’s budget, reducing its supply of essential public services.

Abdulhamid acknowledged the budgetary buffer but said the Islamic Revolutionary Guard Corps, “acting through its proxies and loyalist militias, will siphon most of that and will try to use Iraqi wealth as its war chest. As such, should the war last too long (several months), the potential for intercommunal and inter-regional conflict will increase as Iraq’s economy implodes. Iran will follow suit.”




The economies of Iraq, Lebanon and Syria are most at risk, experts say. (AFP)

Should this happen, both said some effect would be felt by even the most robust regional economies, including the Gulf countries currently benefiting from an oil price windfall. Metwally said while the risk was currently low, were oil shipments in the Arabian Gulf and Red Sea to be disrupted, oil revenues of these countries could take a hit.

Abdulhamid said the fate of other countries in the region, especially the Gulf states, will depend largely on “how much the US is willing to help them secure their borders.” He added: “There are certain parties, especially Iran and its proxies, but also Russia and China, who stand to benefit from a prolonged bloody conflict in Gaza because they can score points against Israel, the US, and Europe.”

While the analysts may all agree on who will bear the brunt of an economic hit, there is less consensus on the prospects of the conflict widening. Abdulhamid is convinced that the fighting will be contained, stressing that “everyone has a lot to lose, but there is a limited possibility of the parties blundering into it.”

Likewise, Syrian-Canadian analyst Camille Alex Otrakji does not believe that war is inevitable despite the uptick in belligerent rhetoric. “It is highly probable that Israel, the US, Iran and Hezbollah are constantly fine-tuning and re-evaluating a broad spectrum of contingency plans, encompassing both defensive and proactive offensive strategies,” he said.

“However, the extent to which each party is prepared to escalate remains a puzzle to international observers.




According to the UN,  more than 90 percent of the population lives below the poverty line and 15 million Syrians are in need of humanitarian assistance. (AFP)

“Expressions of confidence and resolve are substantial on all fronts, coupled with claims of unquestionable monopoly on moral clarity. Yet, all the players are constantly issuing warnings to the other side: ‘If you choose to enter this conflict, be prepared to bear an immeasurable cost,’ a sentiment often stemming from a shared desire to avoid further proliferation of the conflict.”

Nevertheless, Otrakji offered what he described as a sample of “the disturbing scenarios circulating so far,” wherein any attempt by Israel to capture Gaza would result in Hezbollah targeting Israeli cities with tens of thousands of high-precision missiles, which in turn would lead to Israel and the US aiming to destroy Damascus — creating a power vacuum in Syria.

“Should the US enter the conflict, Iran’s allied militias, spanning from Iraq to Yemen, could launch attacks on US bases throughout the Middle East,” he said. Summing up, Otrakji said: “Whenever Israeli Prime Minister Netanyahu or one of Washington’s prominent strategic thinkers heralds the dawn of ‘the new Middle East,’ the old Middle East resurges with a resounding reminder of its enduring complexities.”


Darfur civilians ‘face mass atrocities and ethnic violence’

Updated 04 July 2025
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Darfur civilians ‘face mass atrocities and ethnic violence’

  • Medical charity warns of new threat from escalation in fighting in Sudan civil war

KHARTOUM: Civilians in the Darfur region of Sudan face mass atrocities and ethnic violence in the civil war between the regular army and its paramilitary rivals, the charity Medecins Sans Frontieres warned on Thursday.

The paramilitary Rapid Support Forces have sought to consolidate their power in Darfur since losing control of the capital Khartoum in March. Their predecessor, the Janjaweed militia, was accused of genocide in Darfur two decades ago.

The paramilitaries have intensified attacks on El-Fasher, the capital of North Darfur state which they have besieged since May 2024 in an effort to push the army out of its final stronghold in the region.
“People are not only caught in indiscriminate heavy fighting ... but also actively targeted by the Rapid Support Forces and their allies, notably on the basis of their ethnicity,” said Michel-Olivier Lacharite, Medecins Sans Frontieres’ head of emergencies. There were “threats of a full-blown assault,” on El-Fasher, which is home to hundreds of thousands of people largely cut off from food and water supplies and deprived of access to medical care, he said.


Egypt on alert as giant dam in Ethiopia completed

Updated 04 July 2025
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Egypt on alert as giant dam in Ethiopia completed

ADDIS ABABA: Ethiopia moved on Thursday to reassure Egypt about its water supply after completing work on a controversial giant $4 billion dam on the Blue Nile.

“To our neighbors downstream, our message is clear: the dam is not a threat, but a shared opportunity,” Prime Minister Abiy Ahmed said.

“The energy and development it will generate stand to uplift not just Ethiopia. We believe in shared progress, shared energy, and shared water. Prosperity for one should mean prosperity for all.”

The Grand Ethiopian Renaissance Dam is 1.8 km wide and 145 meters high, and is Africa's largest hydroelectric project. It can hold 74 billion cubic meters of water and generate more than 5,000 megawatts of power — more than double Ethiopia’s current output. It will begin full operations in September.

Egypt already suffers from severe water scarcity and sees the dam as an existential threat because the country relies on the Nile for 97 percent of its water. President Abdel Fattah El-Sisi and Sudan’s leader Abdel Fattah Al-Burhan met last week and “stressed their rejection of any unilateral measures in the Blue Nile basin.” They were committed to safeguarding water security in the region, Sisi’s spokesman said.


Explosive drone intercepted near Irbil airport in northern Iraq, security statement says

Updated 03 July 2025
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Explosive drone intercepted near Irbil airport in northern Iraq, security statement says

  • The “Flight operations at the airport continued normally,” the Irbil airport authority said

IRBIL, Iraq: An explosive drone was shot down near Irbil airport in northern Iraq on Thursday, the Iraqi Kurdistan’s counter-terrorism service said in a statement.

There were no casualties reported, according to two security sources.

The “Flight operations at the airport continued normally and the airport was not affected by any damage,” the Irbil airport authority said in a statement.

The incident only caused a temporary delay in the landing of one aircraft, the statement added.


Jordanian and Vatican officials discuss promotion of Petra as destination for Christian pilgrims

Updated 03 July 2025
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Jordanian and Vatican officials discuss promotion of Petra as destination for Christian pilgrims

  • They say there is a strategic opportunity to integrate the UNESCO World Heritage Site into routes for Christian travelers
  • Head of tourism authority says highlighting Petra’s significance to Christian heritage itineraries could enhance Jordan’s position on global religious tourism map

LONDON: Officials from Jordan and the Vatican met on Thursday to discuss ways in which they can cooperate to advance religious tourism, including the promotion of the ancient city of Petra as a destination for Christian pilgrims.

Fares Braizat, who chairs the board of commissioners of the Petra Development and Tourism Regional Authority, said that highlighting the significance of the UNESCO World Heritage Site as part of Christian heritage itineraries could enhance Jordan’s position on the global religious tourism map.

The country has a number of important Christian sites, the most significant of which is the location on the eastern bank of the Jordan River where Jesus is said to have been baptized by John the Baptist. Several popes have visited it, including Francis and John Paul II.

Archbishop Giovanni Pietro Dal Toso, the Vatican’s ambassador to Jordan, confirmed the interest in collaborating with Jordanian authorities, and praised the nation’s stability and its rich historical and religious heritage.

Both officials acknowledged the strategic opportunity that exists to integrate Petra into pilgrimage routes for Christian travelers, the Jordan News Agency reported.

The Petra tourism authority recently lit up the Colosseum in Rome with the signature colors of the historic Jordanian site to celebrate a twinning agreement as part of a marketing strategy to attract European visitors, and to raise Petra’s profile globally as a premier cultural and spiritual tourism destination.

The Vatican itself is also a major tourism destination, for Christian pilgrims in particular. In 2025 it is expected to welcome between 30 and 35 million visitors during its latest Jubilee Year, a significant ecclesiastical event that takes place every 25 years.


Last lifelines in Gaza are being cut, UN chief warns

Updated 03 July 2025
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Last lifelines in Gaza are being cut, UN chief warns

  • Secretary-General Antonio Guterres again raises alarm over increasingly dire humanitarian crisis as restrictions on aid mount and civilians run out of safe places to shelter
  • He expresses grave concern over series of attacks in recent days that hit locations in which Palestinians were seeking shelter or trying to obtain food

NEW YORK CITY: UN Secretary-General Antonio Guterres on Thursday said he was “appalled” by the escalating humanitarian crisis in Gaza, condemned recent deadly strikes against displaced people, and warned that the enclave is on the brink of total collapse as fuel supplies run out.

He expressed grave concern over a series of attacks in recent days that hit locations in which Palestinians sought shelter or were trying to access food.

Guterres’ spokesperson, Stephane Dujarric, read a statement that said: “Multiple attacks (have) killed and injured scores of Palestinians. The secretary-general strongly condemns the loss of civilian life.”

Civilians in Gaza are running out of safe areas in which to shelter as Israeli evacuation orders continue to expand, Dujarric added as he warned of a dire humanitarian crisis amid mounting restrictions on the delivery of aid and rising casualties among relief workers.

Israeli authorities issued a new displacement order on Thursday targeting parts of Gaza City, citing as a reason rocket fire from Palestinian groups. It affected an estimated 40,000 people, including those living in a displacement site, a medical facility, and a neighborhood previously spared evacuation orders since a temporary ceasefire agreement between Israel and Hamas ended in March.

“As of earlier today, about 900 families are estimated to have fled,” Dujarric said, adding that approximately 78 percent of the Gaza Strip has now been affected by the cumulative effects of more than 50 such orders. When combined with the effects on areas designated as Israeli militarized zones, the figure rises to 85 percent, leaving just 15 percent of the territory available for civilians to live.

“Those areas are, of course, overcrowded,” Dujarric said. “They also severely lack basic services or proper infrastructure.”

He described the remaining habitable zones as fragmented and unsafe, and compared the humanitarian conditions there to having more than 2 million crammed into Manhattan but

“instead of buildings, the area is strewn with the rubble of demolished and burnt-out structures without any infrastructure or basic support.”

The UN Population Fund has reported that an estimated 700,000 women and girls in Gaza are experiencing “a nightmare” situation as a result of lack of access to menstrual hygiene products, water and privacy. It said it has nearly 170 truckloads of supplies ready for delivery but they remain blocked from entering Gaza.

Meanwhile, the UN’s Office for the Coordination of Humanitarian Affairs said that nine more aid workers from five organizations have died in Gaza since last Thursday, bringing the death toll among aid personnel to 107 in 2025, and 479 since the war began in October 2023; 326 members of UN staff are among the dead.

OCHA also highlighted the significant obstacles humanitarian operations faced in June. Out of nearly 400 attempts to coordinate with Israeli authorities, 44 percent were denied, and 10 percent were initially approved but later obstructed. Only a third of the missions were fully facilitated, while 12 percent were canceled due to logistical or security issues.

Four out of 16 humanitarian coordination efforts were denied on Thursday alone, Dujarric said, hindering efforts to relocate medical supplies and clear debris.

“The space left for civilians to stay is shrinking by the day,” he added.

In his statement, Guterres underscored the fact that international humanitarian law is “unambiguous” in its requirement for civilians to be protected and their basic needs met.

He warned that the continuing blockade on fuel deliveries, now entering an 18th week, threatens to bring remaining humanitarian operations to a halt.

“Without an urgent influx of fuel, incubators will shut down, ambulances will be unable to reach the injured and sick, and water cannot be purified,” he said, adding that the UN and its partners might soon be unable to deliver even the limited amount of aid that remains in Gaza.

Guterres repeated his call for “full, safe and sustained humanitarian access,” and said the UN has a ready, proven plan to deliver aid “safely and at scale” to civilians across the territory.

He also renewed his appeal for an “immediate, permanent ceasefire” and the “immediate and unconditional release of all hostages,” and stressed that all parties involved in the conflict must uphold their obligations under international law.