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Iran uncertainty will hit the Gulf’s economic recovery

Following today’s news (Wednesday, 8th January 2020) that oil prices have risen after Iran had fired more than a dozen missiles at airbases used by the US military in Iraq. Safe haven assets, such as gold and the Japanese yen, have also rose. At the same time global stock prices were sent lower on concerns over the growing conflict in the Middle East;

Colin Foreman, Deputy Editor at GlobalData, a leading data and analytics company, offers his view on the news:

2017 04 20 114457“While the world waits to see what happens next, the economic impact for the region has already been felt. When stock markets opened on 5 January, the first trading day in the region after the Soleimani assassination, bourses around the region plunged.

“While war may not happen, it is likely that investors will remain spooked long into 2020 and this will be a drag on private sector activity at a time when the region’s non-oil economy is forecast to drive economic growth.

“Over the past five years, regional governments have been working hard to restructure and reform their economies so that they are less dependent on oil and gas and more attractive for private sector investment. Those efforts were expected to produce results in 2020, with the International Monetary Fund (IMF) predicting more rapid growth in key markets such as Saudi Arabia and the United Arab Emirates (UAE).

“Oil gross domestic product (GDP) may fare better. Rising tensions typically mean an increase in oil prices, which will benefit oil-exporting countries. The problem is the potential oil price windfall comes with other negative economic consequences.”

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