Global Affairs Session 22 24 April 2026

THE GULF STATES: BETWEEN DEVIL AND THE DEEP SEA

How prosperity, geography and security dependence expose the Gulf during a regional crisis

The Gulf states convert energy wealth into high living standards, modern infrastructure and global influence. Yet the same geography that makes the region strategically valuable also exposes it to disruption at the Strait of Hormuz, military escalation, supply-chain shocks and dependence on external security guarantees.

Strategic context The Gulf states Business model People and living standards American presence Hormuz closure War damage Key conclusions

Why the Gulf is strategically central

The Gulf combines oil and gas wealth, shipping routes, financial centres, logistics networks, tourism, rapid urbanisation and military infrastructure. The region is therefore not merely an energy-producing zone: it is a strategic junction connecting global trade, security and geopolitics.

The presentation frames this importance through the Carter-era proposition that an outside attempt to control the Persian Gulf would be treated as an assault on vital United States interests. That idea helps explain why Washington has maintained a long-term military presence across the region and why control of energy routes remains inseparable from security policy.

The Strait of Hormuz is the most immediate vulnerability. Closure or severe disruption can raise oil and gas prices, interrupt energy supply, slow global economic activity and create bottlenecks across shipping and supply chains. Gulf states are affected directly because their revenues, imports, industrial activity and domestic stability are tied to reliable maritime access.

The Gulf states

The Gulf states—Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman—combine energy wealth, strategic waterways, financial hubs, tourism, logistics and rapid modernisation, making the region central to global trade, security and geopolitics.

These six countries form the Gulf Cooperation Council, established in 1981 with its headquarters in Riyadh. The organisation provides a framework for political, economic and social cooperation, although the member states differ considerably in size, population, resource base and strategic outlook.

• Saudi Arabia: The largest GCC state by territory and population, with Riyadh as its capital. Its economic importance rests heavily on oil and gas, major fields and facilities such as Ghawar, Safaniya, Ras Tanura, Shaybah, Abqaiq and the Yanbu industrial hub.
• United Arab Emirates: A global business, logistics and tourism hub centred on Abu Dhabi and Dubai. Major energy points include Upper and Lower Zakum, the Habshan gas complex, Ruwais refinery, Fujairah oil terminals and the Bab field.
• Qatar: A major liquefied-natural-gas exporter, with Doha as its capital. The North Field, Ras Laffan Industrial City and Mesaieed Industrial City are central to its energy economy.
• Kuwait: An oil-producing and financial-services centre led from Kuwait City. Its major energy locations include Greater Burgan, Raudhatain, Sabriya, Mina Al Ahmadi and the Shuaiba industrial area.
• Oman: A more geographically open and relatively diversified Gulf economy, with Muscat as its capital. Petroleum Development Oman blocks, Sohar, Sur LNG and Duqm connect energy production with ports and industrial development.
• Bahrain: The smallest GCC member by land area, with Manama as its capital. Banking, tourism, the Awali oil field, Bahrain Refinery and Sitra remain important to its economy.

Iran and Turkey are not GCC members, but both are major regional actors. Iran directly borders the Persian Gulf and exercises influence over the Strait of Hormuz, while Turkey occupies a strategic crossroads linking the Gulf and the wider Middle East.

Business model of the GCC states

Gulf states convert oil and gas rents into state revenue, welfare, subsidies, public jobs, infrastructure and low taxation, producing high living standards while also creating resource dependence and reliance on expatriate labour.

The model operates through four connected stages:

• Natural-resource extraction: The state controls abundant crude-oil and natural-gas reserves and the institutions responsible for producing them.
• State-controlled revenue collection: State-owned companies sell oil and gas into global markets, and the resulting export rents flow into the public treasury.
• Wealth distribution: Revenue finances heavily subsidised healthcare, education and utilities; housing and pension benefits; public-sector employment; and large-scale infrastructure development.
• Economic and social outcomes: Citizens may face little or no direct income taxation and receive high living standards, but the system can also produce resource dependence and a large expatriate labour force in construction, services and other sectors.

This arrangement has operated for decades. It strengthens state capacity during periods of high energy revenue, but it also leaves public finances and social expectations exposed when exports, prices or shipping routes are disrupted.

The people and living standards

Gulf living standards are shaped by high per-capita incomes, modern healthcare, education, safety, infrastructure, housing and recreation, supported by resource wealth, small citizen populations and large expatriate workforces across rapidly urbanising economies.

The presentation’s population estimates illustrate the unusual demographic structure of the region:

• Bahrain: Approximately 1.6 million people, with citizens shown at about 47 per cent and expatriates at about 53 per cent.
• Kuwait: Approximately 4.8 million people, with citizens shown at about 31 per cent and expatriates at about 69 per cent.
• Oman: Approximately 5.3 million people, with citizens shown at about 60 per cent and expatriates at about 40 per cent.
• Qatar: Approximately 3.0 million people, with citizens shown at about 12 per cent and expatriates at about 88 per cent.
• Saudi Arabia: Approximately 37 million people, with citizens and expatriates shown at roughly 60 per cent and 40 per cent respectively.
• United Arab Emirates: Approximately 11 million people, with citizens shown at about 10 per cent and expatriates at about 90 per cent.

These figures are presented as approximate 2024–2025 estimates. Their main analytical value is the contrast between relatively small national populations and very large expatriate workforces in several states.

What produces high living standards

The session connects resource wealth and state expenditure with a wider quality-of-life system. High income is translated into hospitals, doctors and life expectancy; modern schools and universities; policing and surveillance; airports, roads and world-class facilities; high-quality housing; and extensive shopping and recreation amenities.

• Healthcare: Broad access to hospitals, doctors and modern treatment.
• Education: Modern institutions, high literacy and significant public investment.
• Safety and security: Stable urban environments supported by strong policing and surveillance systems.
• Infrastructure: Airports, roads, ports, stadiums and rapidly developed cities.
• Housing and recreation: High-quality homes, shopping centres, beaches, theme parks and other urban amenities.

The income and quality-of-life numbers in the infographic are explicitly illustrative. The central point is that resource wealth, small citizen populations and state-led distribution have enabled exceptionally high material standards for nationals, even as outcomes for different categories of expatriate workers can vary.

American presence in the region

US bases across the Gulf give Washington rapid air, naval, logistics, surveillance and missile-defence reach, protecting energy routes, deterring Iran, supporting regional allies and anchoring America’s long-term military presence in the GCC.

• Kuwait: Ali Al-Salem Air Base supports air operations; Camp Arifjan functions as an army forward headquarters and logistics hub; Camp Buehring supports staging and training.
• Saudi Arabia: Prince Sultan Air Base supports air and missile defence and coalition operations.
• Bahrain: Naval Support Activity Bahrain hosts the headquarters of the US Fifth Fleet, while Isa Air Base supports air and maritime patrol activity.
• Qatar: Al Udeid Air Base serves as a major regional air base and forward command location, while Camp As Sayliyah supports pre-positioned stocks and logistics.
• United Arab Emirates: Al Dhafra Air Base supports reconnaissance and fighter deployment, while Jebel Ali provides major naval logistics access.
• Oman: Thumrait and Masirah air bases provide logistics and maritime-surveillance reach, while Duqm offers strategic port access.

This network gives the United States speed and flexibility, but it also exposes Gulf partners to retaliation when Washington becomes involved in a regional conflict. The states host critical facilities while retaining only limited influence over American decisions about escalation, ceasefire or war termination.

Hormuz closure and damage in the 2026 war

The Hormuz closure has disrupted oil, gas, shipping and supply chains, raising global prices and inflation while hurting Gulf revenues, trade, security and stability through diverted routes, higher costs and geopolitical escalation.

The presentation separates the damage into global and Gulf-specific effects:

• Oil and gas price spikes: Reduced flows immediately tighten energy markets and raise the cost of fuel internationally.
• Energy-supply disruption: Importing economies face uncertainty, while exporting states lose the ability to move production reliably.
• Global slowdown and supply bottlenecks: Higher transport and energy costs spread into manufacturing, trade, food and consumer prices.
• Hydrocarbon-revenue loss: Interrupted exports create revenue shortfalls and pressure state budgets across the region.
• Import and industrial disruption: Gulf economies face difficulty bringing in food, construction material and other goods, causing local shortages and stalled activity.
• Higher costs and inflation: Shipping insurance, freight charges and domestic fuel prices rise, increasing the cost of living.
• Regional instability: Military risk, security pressures and distrust among states intensify.
• Diverted shipping: Alternatives through the Red Sea or bypass pipelines are longer, more expensive and limited in capacity.

Damage to Gulf states in the regional-war scenario

The presentation’s damage map is explicitly described as a conceptual illustration based on fictional data projections. It should therefore be read as a scenario framework rather than an independently verified account of actual losses.

• Energy infrastructure: Refineries and terminals may face production cuts or export halts; maritime strikes can break tanker supply chains; and disruption to desalination plants can threaten essential water supply.
• Economic fallout: GDP losses, investment flight and higher war-risk insurance premiums can weaken growth and increase the cost of capital.
• Civilian and urban impact: Airports and ports may be closed or restricted, communications and power systems may fail, and urban areas may suffer structural damage.
• Environmental consequences: Oil spills, fires and contamination can damage marine ecosystems and air quality.
• Regional and social impact: Displacement and refugee flows can rise, political tension can deepen and food-security pressures can emerge through import disruption and price spikes.
• Trade-route disruption: Impact zones around the Gulf can force ships onto alternative routes, reducing speed and increasing logistics costs.

What the crisis means for the Gulf states

• Richer Gulf states can spend their way through the crisis, but only if the crisis is short-lived.
• Even the UAE and Saudi Arabia, which have bypass pipelines, cannot escape the crisis.
• Economic diversification depends on stability, not just capital.
• Tourism, talent attraction, AI hubs and data-centre ambitions are all vulnerable.
• The Gulf wants any deal to limit Iran’s control over Hormuz, missiles and proxies.
• Gulf states are close US allies but have limited control over Washington’s war-and-peace decisions.
• Gulf countries are divided: the UAE is more hawkish, while Saudi Arabia backs mediation.
• The worst-case scenario is a prolonged limbo: no full war, no real peace and continuous economic vulnerability.

The central paradox is that Gulf wealth creates resilience but does not remove geographic exposure. Financial reserves, infrastructure and bypass routes can soften the immediate shock; they cannot fully protect economies whose diversification strategies require open skies, secure ports, stable energy flows, international talent and confidence in long-term peace.

Value addition

Glossary and related terms

GCC

Gulf Cooperation Council, a regional organisation comprising Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman.

Strait of Hormuz

The narrow maritime passage linking the Persian Gulf with the Gulf of Oman and the wider Arabian Sea.

Strategic chokepoint

A narrow route whose disruption can affect trade, energy prices and security far beyond its immediate location.

Hydrocarbon rents

Revenue earned from the extraction and export of oil and natural gas, especially when controlled or taxed by the state.

Rentier-state model

A political-economic system in which a large share of state revenue comes from external resource income rather than broad domestic taxation.

Welfare state

A system in which public revenue finances services and benefits such as healthcare, education, housing, pensions and utilities.

Expatriate labour

Workers residing in a country of which they are not citizens; expatriates form a large share of the workforce in several Gulf states.

Economic diversification

The development of industries beyond oil and gas, including finance, tourism, logistics, manufacturing, technology and digital infrastructure.

Bypass pipeline

A pipeline designed to move oil or gas around a vulnerable maritime route such as the Strait of Hormuz.

LNG

Liquefied natural gas, natural gas cooled into liquid form for transport by specialised ships.

Desalination

The removal of salt from seawater to produce fresh water, a critical utility in the arid Gulf region.

War-risk insurance

Additional insurance coverage and premiums applied to ships, cargo or facilities operating in areas exposed to armed conflict.

US Fifth Fleet

The United States naval formation headquartered in Bahrain and responsible for maritime operations across the Gulf and surrounding waters.

Forward military presence

The stationing of forces, equipment and support facilities close to a potential area of operations.

Proxy force

An armed group supported by an external power to advance influence or impose costs without direct conventional war.

Investment flight

The withdrawal or postponement of capital when investors judge a country or region to have become too risky.

Value addition

Conceptual references

• The Gulf Cooperation Council as a framework for political, economic and social cooperation among six Gulf monarchies.
• The resource-rent and welfare-state model through which oil and gas revenue supports public services, employment and infrastructure.
• The Strait of Hormuz as a strategic chokepoint connecting regional security with global energy and trade.
• United States forward military presence across Gulf air bases, naval facilities, logistics hubs and ports.
• The dependence of tourism, technology, logistics, finance and talent-attraction strategies on prolonged regional stability.
• Scenario analysis of energy, economic, environmental, civilian and social damage during a major regional conflict.