New estimates by the United Nations Development Programme (UNDP) suggest the military escalation in the Middle East may cost economies in the region from 3.7 to 6.0 % of their collective Gross Domestic Product.
This represents a staggering loss of $120-194bn and exceeds the cumulative regional GDP growth achieved in 2025, says the UNDP in its assessment, titled “Military Escalation in the Middle East: Economic and Social Implications for the Arab States region”.
Coupled with an estimated rise in unemployment of up to four percentage points or 3.6m jobs lost—more than the total jobs created in the region in 2025, these reversals will push up to 4m people into poverty.
The assessment exposes the concerning reality of structural vulnerabilities characteristic to the region, which enable a short-lived military escalation to generate profound and widespread socio-economic impacts that may persist over the long term.
Impacts vary by region
The findings highlight that impacts are not uniform, varying significantly across the region due to structural characteristics of its main subregions—the Gulf Cooperation Council (GCC), including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE; the Levant, including Iraq, Jordan, Lebanon, Palestine and Syria; North Africa, including Algeria, Egypt, Libya, Morocco and Tunisia; and Least Developed Arab countries, including Sudan and Yemen.
Estimates suggest that the largest macroeconomic losses are concentrated in Gulf Cooperation Council and the Levant subregions, where strong exposure to trade disruptions and energy market volatility drives significant declines in output, investment, and trade. Both subregions stand to lose 5.2-8.5 % and 5.2-8.7 % of their GDP, respectively.
Increases in poverty rates are concentrated in the Levant and Least Developed Arab Countries, where baseline vulnerability is highest and shocks translate more strongly into welfare losses. In North Africa, impacts remain moderate but still significant in absolute terms.
In the Levant, the crisis is expected to increase poverty by 5%, pushing an additional 2.85-3.30m people into poverty, accounting for over 75 % of the rise in poverty across the region.
Reevaluation needed of strategic choices
“This crisis rings alarm bells for countries of the region to fundamentally reevaluate their strategic choices of fiscal, sectoral, and social policies, representing an important turning point in the development trajectory of the region,” said Mr Abdallah Al Dardari, UN Assistant Secretary General and Director of the Regional Bureau for Arab States in UNDP.
“Our findings underline the pressing need to strengthen regional collaboration to diversify economies—beyond reliance on growth driven by hydrocarbons, and to expand production bases, secure trade and logistics systems, and broaden economic partnerships, to reduce exposure to shocks and conflicts.”