Alwaght- On Tuesday, Israeli fighter jets struck the Qatari capital Doha. This is the first Israeli attack on Qatar since start of the Gaza war. The attack targeted Hamas leaders while they were weighing up a US-proposed ceasefire deal. The attack, which drew widespread condemnations from Islamic and world countries, is expected to leave a heavy economic fallout in West Asia and across the world. This report sheds light on the economic consequences of this attack.
Ridhwan Mohammed Saeed, the head of Egypt studies and the director of the economic studies at the School of Economics and Political Science of the University of Cairo, has elaborated on the economic costs of attack on Qatar:
Direct financial losses: Satellite imagery from Planet Labs reveals that Israeli fighter jets took out a walled residential compound, with the attack also tearing through five adjacent buildings. The bombardment is set to pile direct financial costs onto the Qatari government. Rebuilding will run into the billions of dollars—funds that, instead of going toward reconstruction, could have been funneled into Doha's investment projects.
Spiking oil prices : Oil prices are highly sensitive to any conflict kicking off in exporter nations. As a major global supplier, with an economy propped up by the world's third-largest natural gas reserves, Qatar plays a key role. It brings in roughly $8.5 billion from total oil exports, with $2.9 billion going to China and $1.9 billion headed to Japan. In 2024 alone, the country shipped out 28.2 billion Qatar rial ($7.7 billion) in refined oil.
The recent airstrikes have ratcheted up tensions in West Asia, a region that holds a third of the world's oil reserves. This immediately played out in the markets: West Texas Intermediate (WTI) crude edged up 0.6 percent to $83 a barrel. Following the attack on Doha, prices moved up by over a dollar a barrel on Wednesday. Brent crude futures climbed between $1.10 and $1.70 to $67.49, while WTI futures rose by $1.04 to $63.67.
This global price surge will add to the economic burden for oil-importing nations. As a fundamental input, costlier oil drives up production expenses across the board, which in turn feeds into higher inflation rates worldwide.
Soaring shipping costs: Israel’s strike on Qatar has fuelled further instability in West Asia region. With 12-15 percent of global trade moving through the Red Sea, Yemeni attacks on commercial vessels had already pushed up transit insurance costs. The attack on Qatar now doubles down on this pressure, pushing up global shipping costs even further as vessels are forced onto longer routes that come with steeper insurance premiums.
Financial markets tumble: In the wake of the attack on Doha,major Gulf financial markets took a hit. The Qatar Stock Index (QSI) closed down 0.3 percent amid broad losses, with the region's largest lender, Qatar National Bank, shedding 0.5 percent. The Saudi Tadawul (TASI) also dropped 0.3 percent, and oil giant ARAMCO saw its value fall 0.6 percent, marking its worst trading day in over half a decade.
The sell-off spread across the region: Dubai’s main index (DFMGI) ended 0.6 percent lower, dragged down by a 2 percent slide in Emirates NBD stock. The Abu Dhabi Securities Exchange (FTFADGI) pulled back 0.3 percent, logging losses for a fourth consecutive session. Bahrain’s stock index (BAX) edged down 0.2 percent, pointing to the significant financial market toll the bombardment is taking on the Arab Gulf states.
Future outlook
Given the current conditions and the ongoing tensions in the region as a result of the Israeli war on Gaza and other regional states, one can expect the tensions to go on in the region. Reports suggest that since October 7, 2023, Israel has attacked or affected by military actions 11 countries and regions, including Gaza, West Bank, Lebanon, Syria, Iraq, Yemen, Iran, Malta, Egypt, Tunisia,and Qatar.
The Israeli threats on Qatar continue. So, three scenarios should be taken into account:
Scenario 1 (the Optimistic one): If the recent attack remains a limited incident and does not spiral into a broader conflict, the impact on Qatar's economy is expected to be contained. The initial shocks that rippled through the global oil market would likely even out quickly, with prices settling down.
Scenario 2: The middle ground (Most Likely one): Given that Israeli officials continue to ratchet up threats against Qatar, a prolonged period of heightened tension is now the base case. This is especially probable after Israeli forces failed to take out high-ranking Hamas officials in the previous Doha strike. Targeting Qatar’s energy infrastructure could now be lined up as a potential pressure tactic by Tel Aviv to force Doha into exiling or handing over Hamas figures.
Such a strategy would eat into Qatar's GDP and natural gas revenues, at least in the short term, and would likely set off fresh turmoil in regional financial markets. This could play out over a multi-year period, meaning the world should brace for further limited, periodic Israeli strikes on Qatari soil aimed at squeezing the country. The economic repercussions for Qatar and the wider region would be severe.
Scenario 3: (The worst one): This apocalyptic scenario envisions Israel carrying out a massive, widespread attack on Qatar aimed at taking down its energy facilities. The result would be a global energy crisis and billions in damages. The true impact would be a deep, multi-year economic crisis stretching beyond West Asia to engulf Europe and the US for over five years.
However, precisely because this scenario would wipe out economic growth in Europe and the US, it is highly improbable. It is unlikely the Israeli regime would go ahead with such a comprehensive attack on Qatar, knowing it would trigger a catastrophic global backlash. This makes the worst-case scenario a distant possibility.
Impacts on global economy
Finally, the ramifications of Israeli attack on Qatar go far beyond this small Persian Gulf emirate and will considerably have regional and international impacts. At Persian Gulf and Arab levels, the possible strikes on energy or infrastructure of Qatar would pose a direct threat to stability of financial markets and increase the national security costs of countries. It also could lead to change in economic and political alliances amid growing need for networks of collective protection.
Globally, any disruption of supply of LNG by Qatar as the biggest exporter will immediately affect the global energy prices and lead to fluctuations on European and Asian markets and exacerbate the energy crises and inflation waves in the global economy. It also will increase the insurance and transportation costs in the Persian Gulf, hence, raising the global trade costs.
Therefore, the cost of the recent bombing in Doha adds up to far more than just a local incident for Qatar. If tensions rumble on, the situation could easily escalate into a full-blown regional and global crisis. This is because conflict in the Persian Gulf ripples out, sending shockwaves through the entire international economic system and pushing up costs far beyond its immediate geography.
