As the global trade war escalates, driven by fresh US tariffs, the Gulf Cooperation Council (GCC) nations have largely avoided direct economic shocks—at least for now. While North America, Europe, and China grapple with retaliatory levies and slowing trade, the Middle East finds itself in a precarious position. Despite being shielded from immediate impacts, analysts warn that the GCC’s deep reliance on oil and dollar-pegged economies leaves it vulnerable to the broader fallout. However, within this uncertainty, new opportunities are also emerging.
With oil prices facing fresh volatility—Brent crude slipping to $70 per barrel in early 2025, down from $85 the previous year—GCC economies such as Saudi Arabia, the UAE, Qatar, Oman, and Bahrain could experience indirect setbacks. Oil revenues remain the bedrock of their financial stability, making price fluctuations a significant concern.
Trade restrictions have hit certain GCC exports, notably aluminium and steel. Yet, these industries represent only a small fraction of the region’s trade profile, softening the impact of US-imposed tariffs. In 2024, Gulf states accounted for 16% of US aluminium imports, with the UAE and Bahrain leading shipments. Despite these figures, Standard Chartered’s MENA economist Carla Slim cautions that broader tariff uncertainty could weigh on the region, primarily through oil price fluctuations.
Another key factor shaping the GCC’s economic trajectory is the US dollar. A 3% decline in the dollar’s value against major global currencies since January has driven up import costs for Gulf nations reliant on foreign goods. Paradoxically, trade wars tend to strengthen the dollar over time, making oil—priced in dollars—more expensive globally. While this could temporarily benefit GCC exporters, sustained trade tensions may ultimately erode demand. The International Energy Agency predicts a 1.2 million barrel-per-day drop in global oil demand by Q3 2025 if protectionist policies persist.
Efforts to diversify away from oil dependence remain ongoing, with Saudi Arabia’s Vision 2030 and the UAE’s economic reforms leading the charge. However, hydrocarbons still form the financial backbone of the region, limiting the effectiveness of these initiatives in the short term. “Oil continues to dominate revenue streams,” said Edward Bell, acting chief economist at Emirates NBD. For the UAE—a major global trade and logistics hub—any slowdown in international commerce presents a headwind to growth.
Beyond the Gulf, the trade war’s impact on Middle Eastern economies varies. A stronger dollar intensifies the burden of dollar-denominated debt, a challenge for nations such as Lebanon, Jordan, and Egypt. Jordan, in particular, faces heightened risks, with a quarter of its exports—primarily textiles and jewellery—destined for the US. Despite these vulnerabilities, its close economic ties with Washington, including US aid commitments, may cushion potential blows.
Amidst economic turbulence, new opportunities are emerging. Trade corridors between the GCC and Asia are expanding at an annual rate of 15%, driven in part by China’s Belt and Road Initiative. In 2024, total trade between the GCC and Asia reached $220 billion, marking an 8% year-on-year increase. Slim predicts this trend will gain momentum as Asian businesses establish deeper footholds in the Gulf.
Geopolitics is also playing a pivotal role. The US, under President Donald Trump, views the Gulf as a key counterbalance to China. His administration has urged OPEC+—led by Saudi Arabia—to boost oil output, a move aimed at stabilizing global prices. “Trump’s request provided OPEC with political cover to adjust production,” said James Swanston, a senior economist at Capital Economics. A planned production increase in March 2025 reflects this shifting dynamic.
Diplomacy remains a crucial tool in the GCC’s strategy to navigate trade tensions. The UAE has secured trade agreements covering 40% of its exports, with key markets such as India and South Korea. These strategic partnerships help mitigate risks by diversifying economic relationships and reducing dependence on Western trade routes.
As the global trade landscape grows increasingly uncertain, the GCC finds itself balancing resilience and risk. Oil revenues and strategic diplomacy offer some insulation, but long-term stability depends on strengthening domestic demand and broadening economic foundations. As one analyst aptly put it, “Future-proofing the Gulf’s economy will require bold steps beyond oil.