Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?

Palestinian civilians in Gaza have seen their homes devastated, main, since the Israel-Hamas conflict began on Oct. 7, which now threatens to drag troubled Arab states including Syria, bottom left, Lebanon, bottom, and Iraq, right, into a wider regional war. (AFP)
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Updated 24 October 2023
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Can Arab countries absorb a regional conflict’s economic shocks if Israel-Hamas war in Gaza expands?

  • Bulk of impact expected to be felt by economies already grappling with crises, notably Syria, Lebanon and Iraq
  • Geographical distance from the war zone potentially offers room for maneuver for some Arab countries

LONDON: Western media may be warning of “drastic implications” for the global economy should the conflict in Gaza spill over into neighboring countries, but Middle East analysts predict that the economic brunt of a wider conflagration will be borne by crisis-ridden regional countries.

A number of developments are being seen as an omen of things to come. From Lebanon, Hezbollah and allied Palestinian factions have been trading daily cross-border fire with Israel. A US Navy ship has intercepted missiles launched by the Houthi militia in Yemen. Two American bases in Syria have come under fire. And in Iraq, drones and rockets have fired at US forces.

Several countries, including Saudi Arabia, Kuwait, the US, the UK, Germany, France and Canada, have encouraged their nationals to avoid travel to Lebanon or leave while flights remain available.

Forecasting a 60-percent chance of “prolonged conflict” and the potential for the “increasing involvement” of regional actors, including Iran-backed militias, Ali Metwally, a London-based expert, says the economies of Iraq, Lebanon and Syria are most at risk.

“If Hezbollah were to enter into a conflict with Israel, Lebanon would likely suffer significant economic consequences due to its close association with the group and the potential for direct military engagement,” he told Arab News.




 Palestinian girl carries a blankets as she walks past the site of a deadly explosion at al-Ahli hospital, in Gaza City. (AFP)

Lebanon’s tourism and hospitality sectors, major contributors to its service-oriented economy, would suffer the most while its supply chains would face disruption from “any damage to or closure of the port of Beirut,” causing “shortages of essential goods” and “fueling the current hyperinflation.”

Given the financial collapse of 2019 and the resulting paralysis suffered by Lebanese banks, Metwally speculated that any further shocks would only serve to scare off the remaining depositors and investors.

Similarly, Syria, which has been a proxy battleground since the onset of civil war in 2011, has endured high input costs and inflation rates, fuel and medicine shortages, a collapsed currency, devastated infrastructure, and water scarcity for the better part of a decade.

This, according to the UN, has left more than 90 percent of the population below the poverty line and 15 million Syrians in need of humanitarian assistance. Ongoing EU and US sanctions — which also limit the capacity for even those governments that have restored diplomatic ties with Syria to invest in its reconstruction — have only served to exacerbate this.

Were a wider conflict to be introduced into this mix, Metwally said, vital aid flows may be cut off because of a “possibility that the international community would redirect aid efforts from rebuilding and stabilizing Syria to addressing the new conflict, leaving the country with fewer resources for post-war reconstruction.”

Metwally’s concerns are echoed by Ammar Abdulhamid, a US-based political analyst, who said that a wider war “means that the two countries — Syria and Lebanon — will become battlegrounds, and whatever leadership exists in both countries will be decimated. The two states will collapse as such, not just their economies.”




From Lebanon, Hezbollah and allied Palestinian factions have been trading daily cross-border fire with Israel. (AFP)

Noting the likelihood of various Iraqi militias and groups taking sides in any ensuing crisis, Metwally pointed out that the country has no shortage of internal strife, with “sectarian tensions” a continuing concern.

Since “Iraq is heavily reliant on the oil sector in revenue generation and employment, higher security concerns could lead to attacks on oil infrastructure or hinder the movement of oil through critical shipping routes, lowering Iraq’s oil revenue and widening the fiscal deficit of the country after a decent period of surplus.”

Considering all it has been through, Iraq has found a degree of stability unprecedented in the last two decades, and the economy has been gradually recovering since 2021, according to a World Bank report.

INNUMBERS

• $270.36bn Iraq’s GDP (2022).

• $22.4bn Syria’s GDP (2019).

• $20.48bn Lebanon’s GDP (2021).

Source: Statista

In 2022, it earned approximately $115 billion in oil revenues, thanks to a rise in energy prices in the wake of Russia’s war on Ukraine and consequent Western sanctions on Russia. Buoyed by this oil bonanza, the Iraqi government allocated $153 billion for the 2023 budget.

While Abdulhamid thinks Iraq’s geographical distance from Palestine potentially offers it “some room to maneuver,” Metwally remains concerned that “any diversion” of financial resources to address security issues could strain the government’s budget, reducing its supply of essential public services.

Abdulhamid acknowledged the budgetary buffer but said the Islamic Revolutionary Guard Corps, “acting through its proxies and loyalist militias, will siphon most of that and will try to use Iraqi wealth as its war chest. As such, should the war last too long (several months), the potential for intercommunal and inter-regional conflict will increase as Iraq’s economy implodes. Iran will follow suit.”




The economies of Iraq, Lebanon and Syria are most at risk, experts say. (AFP)

Should this happen, both said some effect would be felt by even the most robust regional economies, including the Gulf countries currently benefiting from an oil price windfall. Metwally said while the risk was currently low, were oil shipments in the Arabian Gulf and Red Sea to be disrupted, oil revenues of these countries could take a hit.

Abdulhamid said the fate of other countries in the region, especially the Gulf states, will depend largely on “how much the US is willing to help them secure their borders.” He added: “There are certain parties, especially Iran and its proxies, but also Russia and China, who stand to benefit from a prolonged bloody conflict in Gaza because they can score points against Israel, the US, and Europe.”

While the analysts may all agree on who will bear the brunt of an economic hit, there is less consensus on the prospects of the conflict widening. Abdulhamid is convinced that the fighting will be contained, stressing that “everyone has a lot to lose, but there is a limited possibility of the parties blundering into it.”

Likewise, Syrian-Canadian analyst Camille Alex Otrakji does not believe that war is inevitable despite the uptick in belligerent rhetoric. “It is highly probable that Israel, the US, Iran and Hezbollah are constantly fine-tuning and re-evaluating a broad spectrum of contingency plans, encompassing both defensive and proactive offensive strategies,” he said.

“However, the extent to which each party is prepared to escalate remains a puzzle to international observers.




According to the UN,  more than 90 percent of the population lives below the poverty line and 15 million Syrians are in need of humanitarian assistance. (AFP)

“Expressions of confidence and resolve are substantial on all fronts, coupled with claims of unquestionable monopoly on moral clarity. Yet, all the players are constantly issuing warnings to the other side: ‘If you choose to enter this conflict, be prepared to bear an immeasurable cost,’ a sentiment often stemming from a shared desire to avoid further proliferation of the conflict.”

Nevertheless, Otrakji offered what he described as a sample of “the disturbing scenarios circulating so far,” wherein any attempt by Israel to capture Gaza would result in Hezbollah targeting Israeli cities with tens of thousands of high-precision missiles, which in turn would lead to Israel and the US aiming to destroy Damascus — creating a power vacuum in Syria.

“Should the US enter the conflict, Iran’s allied militias, spanning from Iraq to Yemen, could launch attacks on US bases throughout the Middle East,” he said. Summing up, Otrakji said: “Whenever Israeli Prime Minister Netanyahu or one of Washington’s prominent strategic thinkers heralds the dawn of ‘the new Middle East,’ the old Middle East resurges with a resounding reminder of its enduring complexities.”


Ukrainian in Israel to treat sick daughter killed in Iran strike: mayor

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Ukrainian in Israel to treat sick daughter killed in Iran strike: mayor

The city of Bat Yam identified the victim as Maria Peshkarova, 31
Peshkarova had traveled to Israel in 2022 on a medical visa to seek life-saving treatment for her daughter, 8

JERUSALEM: The body of a Ukrainian mother who had traveled to Israel for her daughter’s leukemia treatment was recovered on Thursday from a building struck by an Iranian missile four days earlier, Israeli officials said.

The city of Bat Yam, close to Tel Aviv, announced that “in the past few minutes, a body was found at the site of the missile impact,” identifying the victim as Maria Peshkarova, 31, also known as Marina.

Peshkarova had traveled to Israel in December 2022 on a medical visa to seek life-saving treatment for her daughter Anastasia, 8, who was killed along with her grandmother in the destroyed apartment bloc in Bat Yam, according to the mayor’s office.

Peshkarova’s husband is fighting in Ukraine’s war against Russia, according to the Israeli news website Ynet.

Israeli authorities had previously released the names of eight people killed in the strike and had stated that one person was missing.

Peshkarova’s confirmed death takes the total deathtoll in Israel to 25 since the war with Iran started on Friday, according to authorities.

Ukraine’s Ministry of Foreign Affairs announced Sunday that five of its nationals were killed in the Iranian strike on Bat Yam near Tel Aviv, including three minors.

Ukraine on Tuesday urged its citizens to leave Israel and Iran as soon as possible amid the spiralling conflict between the two countries.

Israel restarts limited gas exports amid ongoing conflict, Egypt still waiting

Updated 28 min 50 sec ago
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Israel restarts limited gas exports amid ongoing conflict, Egypt still waiting

  • A ministry spokesperson said exports are now resuming “from surpluses, after domestic needs are met“
  • An energy ministry source said most of the limited exported gas is currently flowing to Jordan

CAIRO: Israel has resumed limited natural gas exports from surplus supplies, the country’s Energy Ministry said on Thursday, nearly a week after shutting down two key offshore fields as Israel and Iran waged an air battle.

A ministry spokesperson told Reuters that exports are now resuming “from surpluses, after domestic needs are met.”

An energy ministry source said most of the limited exported gas is currently flowing to Jordan, and only “tiny volumes” reached Egypt this week.

Egyptian fertilizer producers, who were forced to halt operations due to the supply disruption, told Reuters they have yet to receive any gas but expect flows to resume next week.

The Egyptian Petroleum Ministry did not immediately respond to a Reuters request for comment.

Following military escalation in the region, Israel halted exports on June 13 after closing the Leviathan field, operated by Chevron and the Karish field operated by Energean. Only the Tamar field has remained operational, supplying mainly domestic demand.

Israeli Energy Minister Eli Cohen said on Wednesday that exports would only resume once military authorities deemed it safe.

“I don’t want to use our strategic storage, so therefore, I needed to cut exports,” he told Reuters.

Egypt, which has increasingly relied on Israeli gas since a domestic production decline in 2022, is scrambling to compensate for the supply gap.

The country has ramped up fuel oil use in power plants and has signed deals to import over $8 billion worth of liquefied natural gas, while preparing additional floating regasification units.

Israeli gas typically accounts for up to 60 percent of Egypt’s total gas imports and around a fifth of its total consumption, according to data from the Joint Organizations Data Initiative (JODI).


Aoun to US envoy: We look forward to American support in strengthening security in southern Lebanon

Updated 19 June 2025
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Aoun to US envoy: We look forward to American support in strengthening security in southern Lebanon

  • Lebanese leader announces dramatic increase in troop deployment south of the Litani River
  • Hezbollah condemns assassination threats against Iranian Supreme Leader Ali Khamenei as ‘reckless’ and warns of ‘grave consequences’

BEIRUT: Lebanese President Joseph Aoun assured US Ambassador to Turkiye and Special Envoy to Syria, Thomas Barrack, that Lebanon “looks forward to US support in its efforts to restore security and stability in the south,” adding that this includes the withdrawal of Israeli forces from the five occupied hills, an end to hostilities, and the extension of UNIFIL’s mandate.

He said that UNIFIL, in coordination with the Lebanese Army, is working to implement Resolution 1701, ultimately enabling the army’s deployment along the internationally recognized borders.

Aoun also said that Lebanon will increase the number of army personnel deployed south of the Litani River to 10,000 soldiers. Their responsibilities include eliminating unauthorized armed presence, seizing illegal weapons and ammunition, and ensuring that only official security forces operate in the area.

However, he added that their ability to fully carry out this mandate remains hindered by the Israeli occupation of the five hills and the surrounding areas.

The Lebanese president reaffirmed the country’s commitment to advancing the principle of exclusive state control over weapons. He informed Barrack that “consultations are ongoing at both the Lebanese and Palestinian levels regarding the issue of arms in the Palestinian refugee camps, with the hope that these efforts will intensify once the region stabilizes, following the recent escalation in the Israeli-Iranian conflict.”

A source at the presidency told Arab News: “Barrack was informed that Lebanon is moving toward the withdrawal of weapons from north of the Litani River, but this process will take time. Hezbollah is a Lebanese party, and its members will remain in the country. There is historical precedent — after the civil war, militias gradually handed over their weapons to the state, a process that took considerable time to complete.”

The source said that Barrack, who is overseeing the Lebanese file until a successor to former US envoy Morgan Ortagus is appointed, “demonstrated an understanding of Lebanon’s position during his meetings with political officials on the disarmament issue, and his response was generally seen as positive.”

While no official response was issued regarding Barrack’s warning about potential Hezbollah involvement alongside Iran, the party released a statement on Thursday condemning US threats against Iran’s Supreme Leader, Ali Khamenei.

Hezbollah warned that “threatening his assassination is not only a political miscalculation, but a reckless act with dangerous consequences.”

Hezbollah affirmed that it is “more firmly committed than ever to the path of Imam Khamenei and his firm stance, and more united around his leadership in confronting US-Israeli aggression against the Islamic Republic. Through its blind support for Israel, the US is steering itself toward an abyss from which it will not emerge.”

On Thursday, the Iranian Embassy in Lebanon received a large delegation of Lebanese parties, political forces, and figures aligned with Hezbollah, along with representatives from Palestinian factions closely affiliated with the party.

The visit was held to “affirm their solidarity with Iran in the face of Israeli aggression.”

Iranian Chargé d’Affaires Tawfiq Samadi said that “any military response by Iran will be measured, precise, gradual, and proportionate to the level of threat.”

He placed responsibility on the US for its unwavering support of Israel, saying that it bears accountability for “the crimes committed against Iran.”

While acknowledging that the US is not currently a direct party to the aggression, he cautioned that “continued American support for Israeli actions would carry strategic and legal consequences.”


Iran arrests dissident rapper formerly on death row: supporters

Updated 19 June 2025
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Iran arrests dissident rapper formerly on death row: supporters

  • The reported arrest of Salehi comes amid the nearly week-old war triggered by Israeli
  • Salehi, 34, has bitterly criticized Israel’s strikes on his country as well as the failure of Iranian authorities to protect citizens

PARIS: Iranian authorities have arrested Toomaj Salehi, a prominent rapper who is sharply critical of the Islamic republic’s leadership, the artist’s supporters said on his social media accounts on Thursday.

The reported arrest of Salehi, who is known to fans as Toomaj and had previously been sentenced to death in the wake of nationwide protests, comes amid the nearly week-old war triggered by Israeli attacks on Iran and as rights groups have warned of a crackdown on dissent by Tehran.

Salehi, 34, has bitterly criticized Israel’s strikes on his country as well as the failure of Iranian authorities to protect citizens in the face of the bombardment which began on Friday.

According to a statement published by supporters of Salehi on his official Instagram and X accounts, he had been arrested in the Gulf island of Kish, on Iran’s southern coast.

“We have no information about the detaining agency, his place of detention, or his health. The government is directly responsible for anything that happens to his health and life,” it said.

“Toomaj must be released immediately.”

Rights groups have sounded the alarm on a crackdown in Iran against the background of the Israeli attacks which analysts believe could be aimed at ousting the country’s clerical leadership.

Amnesty International said on Wednesday that “Iranian authorities have responded to Israel’s latest military attacks by imposing Internet restrictions, arresting journalists and dissidents within the country.”

Norway-based NGO Iran Human Rights said on Thursday that at least 223 people have been arrested nationwide on charges related to collaboration with Israel.

The group said its tally is based on official media reports, but the real figures are likely higher.

Internet monitor Netblocks said that Iran was under its most severe “blackout incident” since a 2019 wave of protests.

Salehi was previously arrested in October 2022 after publicly backing demonstrations that erupted a month earlier, triggered by the death in custody of Iranian Kurdish woman Mahsa Amini.

He was initially sentenced to death in a verdict that caused international uproar but it was later reduced to prison time and he was released in December 2024.

Activists have accused Iran of torturing him during his 2022 arrest, after state media published a video purporting to show the rapper blindfolded, with bruising on his face, apologizing for his support of the protests.


Turkiye should investigate ‘police violence’ against protesters: Amnesty

Updated 19 June 2025
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Turkiye should investigate ‘police violence’ against protesters: Amnesty

  • Authorities said they arrested nearly 1,900 people during the protests
  • Amnesty said it had “verified dozens of videos documenting how protesters were beaten, kicked and dragged”

ISTANBUL: Amnesty International called on Turkish authorities Thursday to launch an investigation into alleged “police violence” during a wave of protests this year, saying some instances “could amount to acts of torture.”

The arrest of Istanbul mayor Ekrem Imamoglu on March 19, the leading opponent of Turkish President Recep Tayyip Erdogan, sparked Türkiye’s worst street protests in over a decade.

“Our findings reveal damning evidence of unlawful force frequently used by law enforcement officers,” said Esther Major, a deputy director at the global human rights group.

“The authorities used tear gas, pepper spray, kinetic impact projectiles and water cannons against people who were simply exercising their rights,” she said in a statement.

“The violations documented constitute cruel, inhuman, or degrading treatment and, in some cases, may amount to torture,” Major said, calling for the launch of an investigation.

Imamoglu was widely seen as the biggest political rival to Erdogan and his jailing is likely to prevent him from running in the 2028 presidential election.

Authorities said they arrested nearly 1,900 people during the protests, most of whom were accused of participating in illegal gatherings.

The vast majority have since been released.

Amnesty said it had “verified dozens of videos documenting how protesters were beaten, kicked and dragged on the ground by law enforcement officials even when they were dispersing, not resisting or were already restrained.”

The NGO said some “protesters were subjected to water cannon, tear gas, kinetic impact projectiles by police, often at very close range directly targeting the head and upper body, in violation of international human rights law.”

One of them required retinal surgery and may lose sight in one eye, Amnesty said.