A member of the Iranian Red Crescent Society stands at Hypercar, an auto service center, amid damages which according to the company's officials were caused by strikes in Tehran, Iran. AP
The war in the Middle East, which began on 28 February and is now in its fifth week, has expanded into a multi-front crisis with no ceasefire in sight, amid disrupted air cargo routes, oil supply lines, and rising civilian casualties.
The report warned that unemployment could rise by 1.8 to 4 percentage points, leading to the loss of 1.61 to 3.64 million jobs, more than the total number of jobs created across the region in 2025. At the same time, an additional 3.05 to 3.96 million people could fall into poverty.
Titled “Military Escalation in the Middle East: Economic and Social Implications for the Arab States Region,” the report highlighted how structural vulnerabilities in Arab economies amplify the impact of even short-term conflicts, with potentially long-lasting socio-economic consequences.
“This crisis rings alarm bells for countries of the region to fundamentally re-evaluate their strategic choices,” said Abdallah AlDardari, assistant secretary-general and director of UNDP’s Regional Bureau for Arab States.
He called for stronger regional cooperation, economic diversification away from hydrocarbons, and more resilient trade and logistics systems.
Gulf, Levant face the biggest losses
The report shows that the economic impact will vary significantly across subregions.
The Gulf Cooperation Council (GCC) countries are expected to suffer GDP losses of 5.2 and 8.5 percent, equivalent to $103 to $168 billion. In the Levant, losses are projected at 5.2 to 8.7 percent, or $17.3 to $28.9 billion.
North Africa is expected to be less affected, with growth ranging from 0.0 to 0.4 percent, equivalent to gains of $90 to $3.2 billion. The least developed Arab countries could see GDP declines of 0.1 to 0.5 percent, or $70 to $320 million.
Jobs, poverty pressures intensify
Job losses are expected to be most severe in the GCC, rising by 3.6 to 9.4 percent, or 1.17 to 3.11 million jobs. In the Levant, unemployment could rise by 2.3 to 2.7 percent, with about 320,000 jobs lost.
North Africa could see a smaller increase of around 0.1 percent (60,000 jobs), while least developed countries may record increases of 0.2 to 0.8 percent, or 50,000 to 200,000 jobs lost.
Poverty impacts are also uneven. The Levant is expected to account for more than 75 percent of the regional increase, with poverty rising by 4.45 to 5.15 percent, pushing 2.85 to 3.29 million people below the poverty line.
In North Africa, poverty could increase by 0.03 to 0.05 percent (59,000 to 103,000 people), while least developed countries may see rises of 0.15 to 0.60 percent (137,000 to 560,000 people).
Poverty levels in GCC countries were not calculated due to their low baseline.
Human development setback
The report also warned of a setback in human development across the region. The Human Development Index (HDI) is projected to decline by 0.2 to 0.4 percent overall, equivalent to about half a year to one year of lost progress.
The GCC could see a decline of 0.3 to 0.5 percent (1.2 to two years of lost progress), while the Levant may experience a drop of 0.4 to 0.7 percent (0.9 to 1.5 years).
North Africa could register a slight gain of 0.0 to 0.1 percent, while least developed countries may see a small but significant decline of up to 0.1 percent.
Conflict scenarios and long-term risks
The UNDP based its findings on computable general equilibrium modelling, simulating five escalating conflict scenarios. These range from a “moderate disruption,” where trade costs rise tenfold, to an “extreme disruption and energy shock,” involving a hundredfold increase in trade costs alongside a halt in hydrocarbon production.
The report stressed that these figures show possible outcomes under different disruption levels rather than actual losses. However, it said the scale of the estimates highlights how exposed the region is to shocks.
It added that the escalation could mark a turning point for development in the Arab region, urging governments to rethink fiscal, sectoral, and social policies to build more resilient and diversified economies.
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