UN development agency warns Middle East war could slash regional GDP by up to $194B

The UN Development Program (UNDP) warned on Tuesday that the ongoing war in the Middle East could cut the Arab region's economic output by as much as $194 billion, reversing more than a year of growth and deepening poverty and unemployment across the region.

In a new assessment, the UN development agency said the armed conflict, now in its fifth week, could shrink the region's collective gross domestic product by between 3.7% and 6%, equivalent to losses of $120 billion to $194 billion. It said the shock would exceed the cumulative GDP growth achieved in 2025.

The UNDP said the escalation has evolved from a localized conflict into a broader regional shock, exposing structural vulnerabilities in Arab economies and amplifying pressure through trade disruptions, energy market volatility, and impaired shipping routes.

The report estimated that unemployment could rise by as much as 4 percentage points, translating into up to 3.6 million jobs lost, while as many as 4 million additional people could be pushed into poverty. The UNDP said these losses would erase hard-won development gains across the region.

"This crisis rings alarm bells for countries of the region to fundamentally reevaluate their strategic choices of fiscal, sectoral, and social policies," Abdallah AlDardari, UN assistant secretary-general and director of the Regional Bureau for Arab States at UNDP, said in the statement.

The UN development agency also said the findings underscore how even a relatively short-lived military escalation can generate long-lasting social and economic damage in a region already burdened by fragility and uneven development.