IV Macro Policy & Sovereign DebtMiddle East and North Africa
From Rabat, Arab neighbours foot more of the Iran war's bill
- Institution
- Policy Center for the New South (PCNS)
- Author
- Hafez Ghanem
- Country · language
- Morocco · English
- Affiliation
- Independent think tank
Summary
A policy paper dated 13 October by Hafez Ghanem, senior fellow at PCNS, calculates the cost of the first six months of the Iran war, from February to August 2026, for 12 countries. The method puts a monetary value on lost output and human losses. A death is priced at $12m and an injury at about $1.3m; physical damage and military spending are left out of the comparison. The headline finding is striking: the total cost to the Arab neighbours is $183.5bn, against $126.6bn for the three belligerents.
The gap is wider still in economic losses. Output losses for Iraq, Lebanon, Yemen and the six Gulf states total $111.9bn; those of Iran, Israel and the US come to $31.5bn. When Iraq's oil output fell from 4.3 million barrels a day to 1.3 million, the World Bank cut its 2026 growth forecast by 15.4 points; Iraq's loss is $39.1bn. Qatar managed to export only 18 LNG cargoes in January–August, against 509 in the same period last year; its loss is $23.8bn. Lebanon's total cost reaches 210.3% of its GDP.
In absolute terms Iran is the single biggest loser: $107.6bn, or 29.6% of GDP, with physical damage separately estimated at $91.1bn. US output was barely affected, which the author attributes to the US being a net oil exporter. Ghanem makes three policy proposals. Gulf states should secure assurances of consultation from the US on decisions of war and peace. They should reduce dependence on Hormuz, Bab el-Mandeb and Suez through pipelines. And the region should jointly tackle the militia problem in its three fragile states.
Blind spot
Applying the same $12m value per death, taken from the US Department of Transportation, to every country pushes low-income Lebanon's human cost to twice its GDP; the ratios are highly sensitive to this. Excluding physical damage makes Iran look lighter. The figures rest on World Bank June forecasts and miss the escalation after September. The author is a former World Bank vice-president with Brookings ties; the method comes from the Atlantic economics tradition.
Talay assessment
Bottom line
The paper shows in figures that the war's cost falls less on the front line than on neighbours dependent on trade routes: Arab countries' output losses total $111.9bn, against $31.5bn for the belligerents. That is an argument to speed up the Gulf's demand for consultation in its security relationship with the US, and its pipeline investment. Because the figures rest on June data, Saudi and UAE costs will very likely be revised up after the Houthi attacks since September.
Likely effects
- Gulf public financesNegative1–6 months
Output losses of $23.8bn for Qatar and $14.9bn for Kuwait widen budget deficits and borrowing needs.
- Pipeline investmentPositive6 months+
The cost of depending on a single strait strengthens the case for Saudi Arabia to accelerate investment in lines to the Red Sea, and for the UAE in lines bypassing Hormuz.
- Fragile statesNegative1–6 months
Lebanon's cost of 210.3% of GDP and Iraq's $39.1bn loss raise external financing needs and the risk of domestic instability.
Possibilities, ranked
- 1Cost estimates revised up60%
Houthi attacks since September enlarge Saudi and UAE losses, and the gap between Arab countries and the belligerents widens.
Watch: Gulf growth revisions in the World Bank's January 2027 Global Economic Prospects report
- 2Gulf seeks consultation assurances25%
Gulf capitals begin to make basing and defence ties with the US conditional on consultation over decisions to go to war.
Watch: A Gulf state announcing a new security agreement with the US that includes a consultation mechanism
- 3Ceasefire halts cost growth15%
A lasting ceasefire takes hold in Hormuz, oil and LNG exports recover and losses stop growing.
Watch: Qatar lifting force majeure on its LNG exports
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Original publication: policycenter.ma · 13 October 2026
This page summarises the institution's view and does not reflect the view of Talay Insight. No direct quotation is used.