The Iran conflict and spillovers to the GCC

Iran’s strikes on the Gulf economies have punctured the perceived security and stability of the region. This will lead to disruptions to non-oil activity in the near term and, if the attacks persist, could also threaten investment and diversification efforts over the longer-term. The UAE’s relatively diversified economy is among the most vulnerable. The possibility of being unable to export energy is a key risk too. That said, so long as lasting damage to energy infrastructure is avoided, the rise in energy prices provides policymakers with scope for a policy response to cushion the blow.