The energy crisis triggered by the war between the U.S., Israel and Iran is expected to fuel inflationary pressures in the global economy, while the economies of Gulf countries – key logistics hubs in global trade – are suffering serious damage from the conflict, according to an Anadolu Agency (AA) report released on Sunday.

This section of AA’s special report series titled “The Toll of War in the Gulf” examines the impact of developments following U.S. and Israeli attacks on Iran, not only on regional economies but also on the global economy.

Asian countries stand out as the main export markets for Gulf nations such as the United Arab Emirates (UAE), Qatar, Bahrain, Kuwait, Saudi Arabia and Oman. Accordingly, the closure of the Strait of Hormuz poses a risk not only to the entire world but especially to Asia.

While this situation leads to significant revenue losses for Gulf countries, it also puts pressure on their production models, which rely heavily on foreign labor.

Since the war began, Dubai’s real estate index has plunged by around 26%, while Qatar’s has declined by about 7%. Meanwhile, Dubai’s financial market index has dropped by roughly 15%.

Similarly, Saudi Arabia’s stock market was down sharply at the onset of the war, and, although it has since partially recovered, it remains at lower levels. Significant declines have also been observed in the UAE and Qatar stock markets.

The region-driven energy crisis also poses risks for global inflation.

Gulf oil

Erhan Akkaş, an associate professor at the Economics Department of Ankara Social Sciences University, stated that the sharp decline in Dubai’s real estate index indicates how negatively the city’s economy will be affected by this process.

Noting that Kuwait, Oman and Bahrain have been similarly impacted, Akkaş said: “There are declines in the stock markets of Gulf countries. However, the UAE and Qatar appear to be much more affected.”

“The UAE, in particular, is impacted by factors such as tourism, financial markets, trade and workers returning to their home countries,” he added.

Akkaş emphasized that the Gulf is an energy-rich region dominated by oil and its derivatives, warning that the closure of the Strait of Hormuz or damage to energy infrastructure would expose countries to serious risks.

He added that problems in the energy sector have a “spillover effect,” impacting even sectors not directly related to oil.

“Since the global economy is largely dependent on Gulf oil and natural gas, production costs rise across nearly all sectors, creating inflationary pressure worldwide,” he noted.

Akkaş also recalled that before the oil era, Gulf exports were largely based on fishing, pearl diving and related economic activities, while imports were dominated by high-value-added industrial goods and consumer products.

He explained that precious stones and metals, such as gold, diamonds and jewelry, are among the most significant goods, especially in imports. These are followed by machinery and mechanical equipment, including industrial machines, turbines and production tools. Electrical equipment ranks third, with computers, phones, and other electronic devices leading this category. Finally, motor vehicles and spare parts are also among the most imported goods in Gulf countries.

Impact on Dubai

At the same time, Akkaş suggested that Dubai will be among the most affected locations, as re-exported goods are directly exposed to the crisis.

“The UAE, especially through Dubai Port, is a re-export hub. Dubai, one of the key centers of global maritime trade and logistics networks, faces the risk of losing this position,” he said.

“Therefore, it is among the places that will be most directly affected.”

“Re-export activities, maritime trade, and port-based sectors are facing serious challenges. Since oil and natural gas are fundamental inputs for nearly all sectors, any decline in production or disruption in logistics leads to interruptions across a wide range of industries, from automotive to packaging,” he maintained.

Furthermore, Akkaş opined that significant issues arise in production processes where plastics and petroleum derivatives serve as raw materials, driving price increases and inflationary pressures.

“This is because oil and its derivatives are essential components in the production of many goods used today,” he said.

White-collar workers may leave

Akkaş noted that such crises can affect nearly all sectors through spillover effects, emphasizing that Gulf economies rely heavily on foreign labor.

He explained that white-collar workers, especially in fields requiring expertise, management, and technical knowledge, such as engineering, are largely recruited from Western countries.

“They may return to their home countries or move to safer regions of the world to find work,” he pointed out.

Higher prices

At the same time, analysts and executives at many financial institutions warn that prolonged war in the Middle East risks higher energy prices, which directly translate into higher consumer prices as oil and gas are key commodities widely used in production processes across industries.

First concerns related to higher prices and inflation came from leading global central banks, which in recent days decided to keep borrowing costs unchanged, or in some cases, like Australia, even deliver a small hike.

In a statement, the Reserve Bank of Australia (RBA) board said the conflict in the Middle East had resulted in “sharply higher fuel prices, which, if sustained, will add to inflation.”

China is reportedly restricting fertilizer exports to protect its domestic market, a ​Reuters report said on Thursday, citing industry sources, in what would mark an additional strain on global markets that were already grappling with shortages caused by the U.S.-Israeli war on Iran.

China is among the ⁠largest fertilizer exporters, shipping more than $13 billion worth of ⁠it last year, and it has a history of controlling exports to keep prices low for farmers.

Shipments through the war-blocked Strait of Hormuz account for roughly one-third of the sea-borne supply. In mid-March, Beijing banned ​exports of nitrogen-potassium fertilizer blends and certain phosphate varieties, sources told Reuters.

The ban, ​which ⁠has not been formally unveiled, was reported earlier this week by Bloomberg News.

Added to existing bans and export quotas for urea, only a handful of fertilizers, notably ammonium sulphate, can be exported, five sources said. That would mean between half and three-quarters of China’s exports last year are restricted, potentially up to 40 million metric tons, according to a Reuters estimate.

“This pattern is consistent: China restricts supplies rather than coming to the rescue during global tightness,” said Matthew Biggin, a senior commodities analyst at BMI.

“The export restrictions exist because of their tight domestic balance, they’re prioritizing food security and insulating their domestic market from price shocks.”

Beijing’s curbs, like its move last week to ban refined fuel exports, come as governments limit exports of products whose inputs have been threatened by disruption from the war, worsening shortages and adding to higher ⁠prices ⁠around the world.

International urea prices have risen by around 40% from pre-war levels. In China, urea futures are near a 10-month high.

Dependent on China

Fertilizers are essential for plant growth and crop yields. Higher prices could lead to reduced usage, or farmers could switch to crops that require less fertilizer.

Last year, China sent Brazil, Indonesia and Thailand roughly a fifth of their fertilizer imports and that figure stood at a third for Malaysia and New Zealand, according to International Trade Centre data. For India, it was around 16%, according to its trade data.

Between half and 80% of those exports are now restricted, according to a Reuters analysis of Chinese customs data.

“Buyers were hoping ⁠China would step in and fill the supply gap, but this decision will only tighten supplies further,” a New Delhi-based fertiliser company official said, in reference to the recent restrictions.

The company official declined to be named due to the sensitivity of the matter.

India, which imported more ​than 40% of its urea, a nitrogen-based fertilizer, and DAP, a blend, from the Middle East last year, has requested China ​issue export quotas for urea.

When will exports resume?

The Philippines on Wednesday said China had assured it that fertilizer exports would not be restricted.

Asked about the comments a day later, China’s Ministry of Foreign Affairs spokesperson referred ⁠the question ‌to other departments.

China’s ‌General Administration of Customs, National Development and Reform Commission and Ministry of Commerce did not ⁠immediately respond to requests for comment.

At a fertilizer conference in Shanghai ‌attended by Reuters on Wednesday, five salespeople said they did not expect the fertilizer bans to be lifted before August, after China’s peak June-to-August export ​period.

Producers are watching for signals from the ⁠government after spring planting to see whether bans would be extended.

In December, the state-linked ⁠fertilizer association urged major producers to suspend exports of phosphate fertilisers until August.

“Most folks who follow this very, very closely ⁠are expecting them to continue ​to extend the export bans,” said Caitlin Welsh, a director at the Center for Strategic and International Studies.

“China is so reluctant to do anything that would increase the price of grains, especially animal feed, domestically.”

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The European Union proposed to Türkiye last month the idea that the candidate for bloc membership could join a cost-cutting payments system to boost integration efforts and benefit those sending money abroad, according to a report on Thursday quoting the EU envoy to Ankara.

Jurgis Vilcinskas, the bloc’s chargé d’affaires in Türkiye, said European Commissioner for Enlargement Marta Kos discussed the proposal with Foreign Minister Hakan Fidan when the two met last month in Ankara.

The EU says its 41-country Single Euro Payments Area (SEPA) makes cross-border euro-currency payments cheaper, faster and more secure. Users in far smaller Balkan candidates, Albania, Moldova, Montenegro and North Macedonia, which adopted the scheme last year, could save up to 500 million euros (around $573 million), it said.

“SEPA could present a valuable opportunity to strengthen Turkiye’s economic integration as a candidate country and a key trade and economic partner of the EU,” Vilcinskas told Reuters in a response, using the Turkish spelling of the country’s name.

It could generate “significant savings annually for Turkish businesses, consumers and diaspora by making cross-border transfers in euros as fast and as cheap as domestic ones,” he said.

Ankara’s view on the matter is unclear.

A Turkish diplomatic source confirmed that during the visit by Kos on Feb. 6, an offer had been conveyed to Ankara, adding the SEPA issue was under the jurisdiction and coordination of the Finance Ministry, which did not immediately comment on the matter.

Steps eyed to bolster economic ties

Under SEPA, Turkish banks could stand to lose revenues on transfers, which vary widely based on size. A Türkiye-Europe transfer of 1,000 euros to 5,000 euros can cost 40 euros, according to Western Union.

Europe is Türkiye’s largest trading partner with more than 200 billion euros in volume. With bloc membership talks effectively stalled for years, both say they want to modernize their customs union and move to boost economic ties.

Trade Minister Ömer Bolat recently reiterated the goal of modernizing the customs union, a decades-old framework, to better suit the present needs. Ankara has also been accepted into the new “Made in Europe” industrial policy, a move seen as reinforcing the economic and trade ties between the duo.

SEPA could bring “significant” savings, especially for the large Turkish diaspora across Europe, a Turkish banking source said.

In an interview this month, Odile Renaud‑Basso, the president of the European Bank for Reconstruction and Development (EBRD), said SEPA would “basically make transactions cost-free.”

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The ongoing conflict in the Middle East is leaving numerous consequences on the global economy and commodity markets. Here is the breakdown of the latest events on Wednesday:

Iraq resumes oil exports via Türkiye

Iraq announced it had resumed limited oil exports through the Turkish port of Ceyhan, using a pipeline that avoids the effectively shut Strait of Hormuz.

The state-owned North Oil Company said it was sending an initial 250,000 barrels a day from its fields in the northern Kirkuk province through the pipeline, well below the 3.5 million barrels a day it has shipped in normal times from its southern Basra fields via the Strait of Hormuz.

Oil prices dip

Oil prices fell following Iraq’s announcement.

The WTI benchmark was down about 1.5% at $94.7 a barrel in volatile trading, even as the United States hit Iranian missile sites near the key Strait of Hormuz and Tehran struck back at crude-producing Gulf neighbors.

Stocks rose in Asia, and opened higher in Europe, also lifted by renewed interest in tech shares.

Japan, S. Korea petrochemical industry slows output

The Middle East war is forcing petrochemical giants in key Asian economies to cut production as the conflict rattles supplies of naphtha, a crucial oil-derived component used to make a range of plastic goods.

Mitsubishi Chemical and Mitsui Chemicals have cut output, Shin-Etsu Chemical said it would raise prices, and LG Chem warned it may not be able to fulfil some orders.

Emergency shipping talks

The International Maritime Organization (IMO) will begin an “extraordinary session” on Wednesday to discuss shipping amid the war.

The IMO’s 40-member council could vote Thursday on several proposed resolutions, including one to “establish a safe maritime corridor to allow the safe evacuation of seafarers and ships stranded in the Persian Gulf.”

However, if passed, resolutions remain non-binding.

South Korea secures oil from UAE

South Korea said it would receive an additional 18 million barrels of oil from the United Arab Emirates (UAE) through alternative supply channels, bypassing the need to use the Strait of Hormuz.

The presidential chief of staff declined to elaborate on the route.

About 70% of South Korea’s oil imports normally pass through the strait.

Fed kicks off series of central bank meetings

The U.S. Federal Reserve (Fed) later Wednesday kicks off a string of central bank meetings that will be closely watched for signs of how monetary authorities view the inflationary impact of higher oil prices.

The Fed is not expected to touch its rates, even as signs grow of a weakening labor market.

The European Central Bank (ECB) and the Bank of England (BoE) meetings are also due on Thursday.

Sri Lanka asks EVs to unplug

Sri Lanka, meanwhile, has urged electric vehicle owners to stop charging their cars at night, saying the surge in demand is forcing the country to burn more coal and diesel to keep the power grid running.

Faced with an energy crisis driven by the war, Sri Lanka has begun rationing fuel and has also imposed a four-day working week starting Wednesday in a bid to reduce travel.

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A generation ago, Poland was rationing staples like sugar and flour, and its citizens earned just a fraction, about one-tenth, of West German wages. Today, its economy has surpassed Switzerland’s, ranking as the world’s 20th largest with annual output exceeding $1 trillion.

It’s a historic leap from the post-Communist ruins of 1989-90 to today’s European growth champion that economists say has lessons on how to bring prosperity to ordinary people – and that the Trump administration says should be recognized by Poland’s presence at a summit of the Group of 20 (G-20) leading economies later this year.

The transformation is reflected in people like Joanna Kowalska, an engineer from Poznan, a town of half a million people midway between Berlin and Warsaw. She returned home after five years in the U.S.

“I get asked often if I’m missing something by coming back to Poland, and, to be honest, I feel it’s the other way around,” Kowalska said. “We are ahead of the United States in so many areas.”

Kowalska works at the Poznan Supercomputing and Networking Center, which is developing the first artificial intelligence factory in Poland and integrating it with a quantum computer, one of 10 on the continent financed by a European Union program.

Kowalska worked for Microsoft in the U.S. after graduating from the Poznan University of Technology in a job she saw as a “dream come true.”

But she missed having a “sense of mission,” she said.

“Especially when it comes to artificial intelligence, the technology started developing so rapidly in Poland,” Kowalska added. “So it was very tempting to come back.”

The guest invitation to the G-20 summit is mostly symbolic; no guest country has been promoted to full member since the original G-20 met at the finance minister level in 1999, and that would take a consensus decision of all the members.

Moreover, the original countries were chosen not just by gross domestic product (GDP) rank, but by their “systemic significance” in the global economy.

But the gesture reflects a statistical truth: In 35 years – a little less than one person’s working lifetime – Poland’s per capita gross domestic product rose to $55,340 in 2025, or 85% of the EU average.

That’s up from $6,730 in 1990, or 38% of the EU average and now roughly equal to Japan’s $52,039, according to International Monetary Fund (IMF) figures measured in today’s dollars and adjusted for Poland’s lower cost of living.

Poland’s economy has grown an average 3.8% a year since joining the EU in 2004, easily beating the European average of 1.8%.

It wasn’t simply one factor that helped Poland break out of the poverty trap, says Marcin Piatkowski of Warsaw’s Kozminski University and author of a book on the country’s economic rise.

One of the most important factors was rapidly building a strong institutional framework for business, he said. That included independent courts, an anti-monopoly agency to ensure fair competition, and strong regulation to keep troubled banks from choking off credit.

As a result, the economy wasn’t hijacked by corrupt practices and oligarchs, as happened elsewhere in the post-Communist world.

Poland also benefited from billions of euros in EU aid, both before and after it joined the bloc in 2004 and gained access to its huge single market.

Above all, there was the broad consensus, from across the political spectrum, that Poland’s long-term goal was joining the EU.

“Poles knew where they were going,” Piatkowski said. “Poland downloaded the institutions and the rules of the game, and even some cultural norms that the West spent 500 years developing.”

As oppressive as it was, communism contributed by breaking down old social barriers and opening higher education to factory and farmworkers who had no chance before. A post-Communist boom in higher education means half of young people now have degrees.

“Young Poles are, for instance, better educated than young Germans,” Piatkowski said, but earn half what Germans do. That’s “an unbeatable combination” for attracting investors, he said.

Solaris, a company founded in 1996 in Poznan by Krzysztof Olszewski, is one of the leading manufacturers of electric buses in Europe with a market share of around 15%. Its story shows one hallmark of Poland’s success: entrepreneurship, or the willingness to take risks and build something new.

Educated as an engineer under the Communist government, Olszewski opened a car repair shop where he used spare parts from West Germany to fix Polish cars. While most enterprises were nationalized, authorities gave permission to small-scale private workshops like his to operate, according to Katarzyna Szarzec, an economist at the Poznan University of Economics and Business. “These were enclaves of private entrepreneurship,” she said.

In 1996, Olszewski opened a subsidiary of the German bus company Neoplan and started producing for the Polish market.

“Poland’s entry to the EU in 2004 gave us credibility and access to a vast, open European market with the free movement of goods, services and people,” said Mateusz Figaszewski, responsible for institutional relations.

Then came a risky decision to start producing electric buses in 2011, a time when few in Europe were experimenting with the technology. Figaszewski said larger companies in the West had more to lose if switching to electric vehicles didn’t work out. “It became an opportunity to achieve technological leadership ahead of the market,” he said.

Challenges still remain for Poland. Due to a low birth rate and an aging society, fewer workers will be able to support retirees. Average wages are lower than the EU average. While small and medium enterprises flourish, few have become global brands.

Poznan Mayor Jacek Jaakowiak sees domestic innovation as a third wave in Poland’s postsocialist economic development. In the first wave, foreign countries opened factories in Poland in the early 1990s, taking advantage of a skilled local population.

Around the turn of the millennium, he said, Western companies brought more advanced branches, including finance, IT and engineering.

“Now it’s the time to start such sophisticated activities here,” Jaśkowiak says, adding that one of his main priorities is investing in universities.

“There is still much to do when it comes to innovation and technological progress,” added Szarzec, the Poznan economist. “But we keep climbing up on that ladder of added value. We’re no longer just a supplier of spare parts.”

Szarzec’s students say more needs to be done to reduce urban-rural inequalities, make housing affordable and support young people starting families. They say Poles need to acknowledge that immigrants, such as the millions of Ukrainians who fled the Russian invasion in 2022, contribute to economic development in an aging population.

“Poland has such a dynamic economy, with so many opportunities for development, that of course I am staying,” said Kazimierz Falak, 27, one of Szarzec’s graduate students. “Poland is promising.”

The economic impact of the ongoing U.S.-Israel-Iran conflict could remain manageable for Türkiye if it lasts no longer than one to two months, Treasury and Finance Minister Mehmet Şimşek said on Monday, but warned of broader risks if the war drags on.

The war is in its third week, with no end in sight. The Strait ⁠of Hormuz remains largely closed off, with U.S. allies rebuffing U.S. President Donald Trump’s request for help to reopen the critical waterway, raising energy prices and fears of inflation.

Şimşek said the conflict is unfolding in one of the world’s most critical energy and trade corridors, which is why it could have a major impact not only on regional economies but also on global markets.

“The key issue is how long the war will last and whether it will spread further,” he told an interview with broadcaster Akit TV, noting that the region accounts for nearly one-fifth of global oil supply.

Energy shock fuels inflation risks

Şimşek said disruptions to supply chains and surging energy prices are already being felt, raising concerns about global inflation.

Brent crude oil prices have risen more than 40% compared to pre-war levels, while natural gas prices in Europe have climbed over 56% and jet fuel prices have nearly doubled, he said.

He highlighted the strategic importance of the Strait of Hormuz, warning that any disruption there would have far-reaching consequences for global trade and energy flows.

“There are serious problems both in the Red Sea and Hormuz, affecting transport between Asia and Europe,” Şimşek said, adding that a prolonged conflict could intensify inflationary pressures and disrupt global trade.

Financial conditions tighten

Şimşek said global risk appetite has weakened as investors shift toward safer assets, tightening financial conditions.

“There is a clear move away from risk. Capital is flowing from emerging markets to what are perceived as safer destinations,” he said.

If the conflict persists, the global economy could face a combination of higher inflation, tighter financial conditions and slower growth, alongside risks of recession or even stagflation, he added.

For Türkiye, Şimşek said the economic impact would be limited if the conflict is short-lived.

“If it lasts one to two months, we think the effects will be manageable, but if it continues longer, it could have negative impacts on the current account deficit and inflation,” he said.

Measures to shield markets and consumers

Şimşek stressed that authorities have not underestimated the risks and are actively managing the situation.

The war-related market volatility prompted Şimşek to convene the Financial Stability Committee, which said it would take all necessary steps to ensure market functioning and contain the fallout.

Şimşek said Türkiye has taken proactive steps to limit the spillover effects on financial markets.

Despite being in the region, Türkiye’s stock market has fallen by around 5.5% since the conflict began, compared with declines of over 10% in countries such as Indonesia, South Korea and South Africa, he noted.

However, he acknowledged that bond yields and risk premiums have risen due to heightened uncertainty.

Fuel price system not sustainable if high oil prices last

To cushion the impact of rising energy prices, the government has reintroduced the sliding scale system, which adjusts the special consumption tax (ÖTV) on fuel products and prevents higher oil prices from being fully passed through to consumers.

Şimşek said without the mechanism, diesel prices in Ankara would have reached TL 83.10 ($1.88) per liter, compared with the current level of TL 67.10. Gasoline prices would have been TL 71.11 instead of TL 62.30.

But Şimşek said the system is not sustainable if ‌high oil prices persist, as it is a burden on the budget. He said the government gave up a significant tax income with the scale system to limit the impact of higher ‌oil ⁠prices on inflation and consumers’ purchasing power.

“We wanted to limit (the high oil price) impact on our ⁠citizens. We believe this is temporary. Of course, if it ⁠becomes permanent, it’s not sustainable … We implemented this ⁠system assuming it would be temporary,” Şişek said.

External balances and trade at risk

Şimşek said the conflict could weigh on Türkiye’s external balances, particularly through higher energy import costs.

“I am somewhat concerned about the current account deficit, as oil prices directly increase it, but I believe it will remain manageable,” he said.

Türkiye’s exports to the region, including Iran, total around $30 billion annually, while imports stand at about $19 billion. The country also receives around 10 million tourists from the region, generating roughly $10 billion in tourism revenue.

Any disruption to trade routes or regional demand could therefore have broader economic implications, he noted.

Inflation outlook remains intact

Despite the shock, Şimşek said he expects inflation to continue declining this year, although uncertainty remains over the pace of disinflation.

“We are facing a serious shock due to the war, but assuming it is temporary, inflation will continue to fall this year,” he said.

He reiterated the government’s goal of bringing inflation below 20% this year but said it was too early to assess whether that target would be met under current conditions.

Annual inflation slowed from over 40% at the beginning of last year to just over 30% this January. But a rise to 31.5% last month signaled a slowdown in disinflation.

Encouraged by the downward trend, the Central Bank of the Republic of Türkiye (CBRT) has slashed interest rates by 900 basis points since mid-2025 to 37%.

But it halted its easing cycle last week due to fallout from the Iran war that it said could impact inflation.

The bank said it was closely watching the effects of “geopolitical developments” on the inflation outlook, and it was ready to take more liquidity steps if needed to support markets.

The CBRT also left unchanged its band of overnight lending and borrowing rates at 40% and 35.5%, respectively. It responded to the volatility amid the conflict by taking liquidity measures that lifted overnight rates to around 40%, up 300 basis points from pre-war levels.

Şimşek added that last year’s economic program had proven its resilience despite multiple shocks, including domestic developments, global trade tensions and adverse weather conditions affecting agriculture.

Budget and reserves remain supportive

He also pointed to improvements in fiscal and external buffers, saying the budget deficit has continued to narrow and Türkiye’s reserves have increased.

Still, Şimşek warned that the conflict represents a major external shock with potential implications for the whole economy.

“The war is currently a significant source of uncertainty. We are facing a major external shock that could have serious potential impacts on the current account deficit, inflation, growth and the budget,” said the minister.

“Nevertheless, I am speaking on the assumption that the shock will be temporary.”