$100 oil: Why higher prices could be both a windfall and a problem for Gulf economies

Oil has crossed the $100-a-barrel mark again, but for Gulf countries this is not simply good news. Brent reached about $100.07 on Wednesday, its highest level since July, as the U.S.-Iran war and attacks on Saudi energy facilities raised fresh fears about supplies.

For countries such as Saudi Arabia and the UAE, the basic calculation is simple.

When oil sells for more, governments can earn more from every barrel they export. That can mean more money for government budgets, infrastructure and large development projects.

The higher price is being caused by the war itself. If attacks damage oil facilities or make shipping routes unsafe, Gulf producers may have fewer barrels to sell.

That risk is already visible in Saudi Arabia, where Iran-backed Houthi forces have attacked energy facilities in the south, including sites around Jazan.

• Who are the Houthis and why are they attacking Saudi Arabia?
• Iran says IRGC attacked U.S. vessels and oil tankers in Persian Gulf and Strait of Hormuz

The Strait of Hormuz adds another layer of risk. Before the latest escalation, around 8-9 million barrels of oil a day were moving through the waterway; recent flows have fallen to below two million barrels a day.

Saudi Arabia has some protection because part of its oil can be moved through pipelines to the Red Sea, avoiding Hormuz. But other Gulf economies remain exposed to the cost of disrupted shipping.

The UAE is in a stronger position because its economy is less dependent on oil than it was in the past. Dubai earns heavily from real estate, tourism, aviation, trade and financial services, so higher oil prices can help government finances while also increasing costs for businesses and consumers.

And that is where the $100 price becomes complicated. Expensive oil brings more revenue, but war also means higher shipping, insurance, transport and energy costs, while weaker tourism, aviation and property activity can put pressure on the wider economy.

For the Gulf, therefore, $100 oil is a benefit only if producers can keep exporting. If prices remain high because the region is losing production and shipping capacity, the extra money from oil may come with an increasingly expensive bill elsewhere.

Read more: 

• OPEC+ nations agree roadmap to strengthen global oil cooperation
• UAE exit from OPEC signals deeper Gulf rift beyond oil markets
• OPEC+ countries release third batch of oil supplies since Hormuz closure

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Global Oil Prices Gulf Region Economy