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.
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