MediumIV Macro Policy & Sovereign Debt9 November 2026, Monday
Allianz Trade puts the Gulf's war bill at $790 billion
Allianz Trade's report, updated on 9 November, estimates that the war will cost Gulf economies $790 billion in lost output over 2026–30, plus a $200 billion reconstruction bill. Regional GDP is expected to contract by 4% in 2026.
The report is signed by five economists from Allianz Trade and Allianz Investment Management. It now sees regional GDP shrinking 4% in 2026, 8.2 points below the previous forecast. Hydrocarbon output is expected to fall 8.5% a year and trade 5.5%. Tourism dropped 22% in the first half of 2026, and Dubai house prices in September stood 10.2% below their January peak.
The real burden falls on financing. The report projects a cumulative budget deficit of $475 billion for 2026–30; including maturing debt, the financing need reaches $722 billion. Of that, $301 billion is to come from new bond issuance, $125 billion from foreign-exchange reserves and $90 billion from sovereign wealth funds. CDS spreads widened in 2026 by 80% in Bahrain, 58% in Qatar, 32% in Dubai and 26% in Kuwait.
The report singles out Kuwait, Qatar and Bahrain as locked in behind Hormuz, and these three see the sharpest contraction. Saudi Arabia and the UAE have partial bypass options, while Oman gains as a bridge to global markets. Khaleej Times led its 11 November live coverage with the same forecast. The report gives no separate figure for insured losses; the $200 billion is a reconstruction cost, not insured damage.
Talay assessment
Bottom line
The report puts numbers on a simple point: the war's mark on the Gulf is lasting, not temporary. Of a $722 billion financing need, $301 billion will be met with new debt. The three states locked in behind Hormuz will pay the most. The most likely path is heavy Gulf bond supply through 2027 and a permanently higher cost of borrowing, led by Bahrain.
Likely effects
- Gulf debt marketNegative1–6 months
$301 billion of new issuance swells emerging-market bond supply; the report expects Bahrain to reprice by more than 100 basis points by 2030.
- Investment flowsNegative1–6 months
Foreign direct investment is running 16% below its pre-war path; Saudi portfolio inflows fell 48% year on year between March and August.
- Bypass infrastructurePositive6 months+
The report sees $160 billion of new foreign opportunities in infrastructure and defence that route around Hormuz, a demand channel for Turkish contractors and defence firms.
Possibilities, ranked
- 1Debt-financed recovery60%
Gulf states close the gap mainly through bond issuance, and CDS spreads stay elevated.
Watch: Gulf sovereign issuance calendar and Bahrain CDS
- 2Reserve- and fund-led financing25%
Governments cap issuance and lean more heavily on reserves and sovereign wealth funds.
Watch: Monthly reserve data from Gulf central banks
- 3Swift peace, smaller losses15%
A lasting settlement in Hormuz restores hydrocarbon exports and the forecast is revised down.
Watch: The next regional forecast updates from Allianz Trade and the IMF
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Output loss 2026–30▼ $790bn
- New bond issuance▼ $301bn
- Regional GDP 2026▼ −4.0%