The ongoing military escalation in the Middle East, now in its fifth week, is projected to lead to significant economic losses for the region. A new report by the United Nations Development Programme (UNDP) suggests that economies in the area could face a decline of 3.7 to 6 percent of their collective GDP, amounting to potential losses of up to $194 billion.
The report also indicates that the total value of these losses might surpass the combined regional GDP growth achieved in 2025. Additionally, the escalation could result in a rise in unemployment by up to 4 percentage points, translating to around 3.6 million lost jobs, exceeding the total number of jobs created in the region in 2025. This situation could push approximately 4 million people into poverty.
Highlighting the structural vulnerabilities in the region, the report warns that a short-lived military conflict could have lasting and profound socio-economic impacts. It emphasizes that these impacts will not be uniform and will vary significantly across different subregions due to their structural characteristics.
The assessment further reveals that human development, as measured by the Human Development Index, is anticipated to decline by approximately 0.2 to 0.4 percent across the region. This setback could equate to a delay of roughly half a year to nearly one year of human development progress, as outlined in the report.
“This crisis underscores the urgent need for countries in the region to reassess their fiscal, sectoral, and social policies. It marks a critical juncture in the region’s development path,” stated Abdallah Al Dardari, UN Assistant Secretary-General and Director of the Regional Bureau for Arab States in UNDP. He emphasized the necessity of enhancing regional collaboration to diversify economies, move beyond reliance on hydrocarbons for growth, and strengthen economic foundations to mitigate risks and conflicts.
The assessment utilized Computable General Equilibrium modeling to evaluate the disruptions caused by a four-week conflict. It simulated various scenarios of escalating conflict levels, from moderate disruptions to extreme scenarios with energy shocks, to gauge the potential impacts on trade costs, productivity losses, and capital destruction.
