The Economic Toll of Conflict: Assessing the Impact of the Israel-Palestine War on GCC Economies

The ongoing Israel-Palestine conflict has had ripple effects on the economies of the Gulf Cooperation Council (GCC) countries for decades. However, the recent escalation of violence in 2021 and 2022 has taken a heavier toll, especially on trade and tourism.

Trade Disruptions

The fighting has led to disruptions in trade through the Suez Canal which is a major artery for GCC shipping to Europe and North America. Approximately 12% of global trade passes through the Suez, including shipments of Gulf oil and gas [1]. Temporary closures of the canal, like the 6 day shutdown due to a grounded container ship in 2021, leads to delivery delays and added costs [2].

The conflict also hampers GCC land routes to Turkey and Europe which pass through Israel and Jordan. Road closures, security checks, and instability add uncertainties and expenses to regional trade. A World Bank study estimated trade route disruptions could cost GCC states 0.2% of their combined GDP annually [3].

Tourism Declines

Tourism accounts for 4.3% of the average GCC nation's GDP [4]. However, clashes between Israelis and Palestinians frequently lead to mass trip cancellations. After the violence in Jerusalem in April 2022, it was reported that GCC visitor bookings dropped by 35% locally and 45% for the city specifically [5]. Hotels, airlines, tour agencies, and related sectors suffer substantially from the ebb and flow of tensions half a world away.

Investment Distraction

Furthermore, episodic strife between Israelis and Palestinians often coincides with lower foreign direct investments flowing into the GCC region. International investors get apprehensive over stability in the Middle East more broadly during conflict flareups. FDI inflows that averaged 2.9% of GCC GDP from 2013 to 2019 dropped to just 1.3% in 2020 when tensions were higher [6]. Getting ensnared periodically in such turmoil creates reputational challenges for Gulf countries seeking foreign capital.

In summary, through repeated trade route troubles, tourism declines, and distracted investors, the struggle between Israel and Palestine has drained GDP, jobs, and opportunities from GCC economies for generations. An enduring peace settlement could provide massive economic dividends.

[1] Lloyd's List, Cost of Suez Canal Blockage

[2] IMF, Role and Impact of the Suez Canal

[3] World Bank, Israeli-Palestinian Conflict Hinders Trade

[4] Middle East Institute, Tourism's Importance for Middle East Economies

[5] Arab News, Travel Agents See Tourism Slump

[6] UN Reports, FDI Flows to GCC Countries