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It feels like the Middle East has been pulled right into the middle of a global trade war, and unfortunately, there’s no sign of things calming down. This ongoing economic tug-of-war between major players like the United States, China, and the European Union is causing ripples of uncertainty everywhere. We’re seeing it hit stock markets and completely reshape the usual rules of international trade.

With Donald Trump back in office, his well-known, aggressive approach to tariffs is sending economic shockwaves around the globe. While the Middle East hasn’t been directly targeted with these tariffs just yet, the region’s deep reliance on oil, the stability of the US dollar, and smooth global trade makes it quite vulnerable to the fallout.

Think back to recent years when the U.S. put tariffs on steel and aluminum. Surprisingly, these didn’t have a big impact on the Gulf region. In fact, the Gulf still accounted for a solid 16% of America’s aluminum imports in 2024. Most of that aluminum coming into the U.S. was from the United Arab Emirates and Bahrain.

However, the real worry isn’t aluminum – it’s oil. If this trade war keeps dragging on and slows down global demand overall, oil prices are bound to take a tumble. That’s a major headache for countries like Saudi Arabia, the UAE, and Qatar, where oil revenues still form the very foundation of their economies.

Oil prices, currency risks, and rising debt hit the Middle East

Here’s another layer to the problem: the U.S. dollar has been on a downward slide since the year began. This means imports are getting more expensive for Middle Eastern nations whose currencies are linked to the dollar.

This dollar peg affects some major players, including Saudi Arabia, the UAE, Oman, Bahrain, and Qatar. Now, if U.S. tariffs end up strengthening the dollar over time, we might see a short-term bump in oil prices. But don’t get too excited – any gains could be quickly wiped out by lower demand if this trade slowdown really takes hold.

“The overall economic outlook for the Middle East and North Africa region is likely to be weighed down by the uncertainty of these global tariffs. This impact will be felt indirectly through oil prices, particularly if tariff uncertainties continue to put a damper on Brent crude prices,” explained Carla Slim, an economist at Standard Chartered.

Recognizing the risks, Gulf nations have been working on diversifying their economies since the 2014 oil price crash, aiming to rely less on oil income. Saudi Arabia has its ambitious Vision 2030 plan, and the UAE is actively investing in new sectors like crypto, artificial intelligence, and finance. But, let’s be honest, oil is still king for now.

“Oil still makes up the largest chunk of income for these economies,” pointed out Edward Bell, chief economist at Emirates NBD.

This trade war is about more than just tariffs hitting specific goods. It’s messing with global trade routes themselves, and the UAE’s thriving logistics and shipping industry is feeling the squeeze. Dubai, being a massive global trade hub, relies heavily on smooth international shipping.

If global commerce slows down, it could mean less activity at places like Jebel Ali Port and the UAE’s free zones. This drop in traffic would then impact revenues across a whole range of industries.

And then there’s the debt issue. Countries like Lebanon, Egypt, and Jordan are already struggling under mountains of external debt, much of which is in U.S. dollars. A stronger dollar just makes servicing that debt even pricier, adding to their existing problems of rising inflation and weakening currencies.

Jordan might be in the trickiest spot of all. Nearly a quarter of its exports go to the U.S., mainly textiles and jewelry. If Washington decides to broaden its tariffs, Jordan’s economy is likely to take a significant hit.

“Jordan’s economy appears to be the most vulnerable to potential new tariffs,” warned James Swanston, an economist at Capital Economics.

However, it’s not all doom and gloom for Jordan. They have strong diplomatic ties with Washington, and Swanston hinted that these connections might help them secure exemptions from potential trade penalties.

The Middle East is looking to Asia as trade corridors change

This whole trade war situation is pushing countries to look for new trade partners, and the Middle East is increasingly turning its attention to Asia. With China’s Belt and Road Initiative expanding, the trade route between the Gulf Cooperation Council (GCC) and Asia is becoming increasingly important.

“For the MENA region, we believe this situation will actually boost the growth of fast-developing trade routes. The GCC-Asia corridor, for example, has already seen long-term growth of 15% and is positioned to benefit the most from these shifts,” Carla Slim noted.

This change in trade focus is also attracting new investments. More and more Asian companies are setting up shop in the Middle East, and Chinese businesses are expanding their presence across the region. Financial links between the Gulf and Asia are also getting stronger.

“The growth in trade volumes is naturally leading to increased financial and investment flows, especially as Asian companies establish themselves in the Middle East or expand their current operations,” Slim added.

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Source: cryptopolitan.com