Dr. Frédéric Schneider is an economist specializing in Gulf Cooperation Council (GCC) economic transformation and the political economy of the Gulf states.
Seven weeks after the U.S. and Israel attacked Iran amid negotiations, the dominant economic narrative has centralized oil prices, energy security and recession risks to the Global North. These concerns are real, with working people worldwide incurring higher living costs and shortages due to the war. What receives less attention, however, is the human suffering that the economic crisis inflicts on those at the epicenter of the conflict: the Persian Gulf region.
Even before the war, Iran's economy was in deep crisis. Decades of U.S. sanctions systematically forced potential trading partners to choose between Iranian commerce and the American financial system, wreaking havoc on the former's economy. The U.S. Treasury Department engineered a dollar shortage to send the Iranian rial into freefall. By February 2026, food price inflation had reached more than 100% year-on-year. Millions of Iranians were already food insecure. Meat, once a staple, became a luxury in working-class households.
The war has compounded these issues. American and Israeli strikes have targeted the country's nuclear power plant, schools, hospitals, bridges, factories and UNESCO World Heritage sites, putting at least 1 million Iranians out of work. Prices have risen at least 40% since the war started. The central bank, running short of denominations large enough for everyday transactions, issued its largest ever banknote — 10 million rials — just weeks after introducing the five-million-rial note. The government is struggling to make public sector payroll.
For a population already surviving on drastically compressed means, the blockade poses a simple question for Iranians: whether there will be enough money to buy bread.
- Frédéric Schneider
The private sector is equally exposed. An electronics factory director in Tehran told the Irish Times that he struggled to find staff before the war. As working Iranians suffer sweeping layoffs, he now receives 30 job applications per vacancy. In Rasht, a factory owner producing concrete blocks has been manufacturing and storing inventory for weeks without a sale. Nima Omrani, a web programmer, posted online that he was selling his bicycle and other possessions: "My friends, I'm in dire financial need." An Iranian official warned privately that the country "will face a disaster" if sanctions relief does not follow any ceasefire because repairing industrial sites will take months, or even years.
Since April 13, the United States has imposed a naval blockade on Iranian ports, costing Iran up to $400 million a day in lost revenues. Humanitarian shipments are exempt, at least in theory. In practice, however, for a population already surviving on drastically compressed means, the blockade poses a simple question for Iranians: whether there will be enough money to buy bread.
Coverage of broader Gulf economic damage centers on gross domestic product forecasts and development program setbacks. The International Monetary Fund cut its growth outlook for the Middle East and Central Asia to 1.9% for 2026, a 2% downgrade. Qatar faces a projected contraction of 8.6%. Bahrain and Kuwait expect even worse.
The human reality beneath this economic commentary is stark. Migrant workers are most at-risk. Roughly 35 million foreign nationals perform indispensable manual and menial work in the Gulf, with nearly 21 million from South Asia alone. These workers feature heavily in sectors targeted by Iran's retaliatory strikes: port facilities, oil refineries, construction sites and airport infrastructure. Hence, the majority of those killed or injured in those strikes have been migrant workers. Three Pakistanis, one Bangladeshi and one Nepali were killed in the United Arab Emirates in a single day, alongside three Indians in Oman and one Indian and one Bangladeshi in Saudi Arabia. These workers become victims because they cannot afford to leave where they work, live and now die.
A Kenyan service worker at the Pioneer Labor Camp in Ras Laffan, one of roughly 50,000 workers at Qatar's largest gas plant, described watching his European and Japanese colleagues depart as their embassies issued advisories. Even after Iran struck the world's largest liquified natural gas plant directly on March 18, the ensuing evacuation order was not intended for his tier of workers, only for "the staff with more important job titles in the adjacent camp."
"It felt like betrayal," he said. His monthly salary is $350. According to his company's new wartime policy, no migrant workers are allowed to leave before September.
Kuna, a 25-year-old pipe fitter from Odisha, died of a heart attack in Doha after hearing missile strikes nearby. In his last message to his father, he said, "I am safe here, don't worry." Kuna's family had previously borrowed 300,000 rupees for his sisters' weddings, which he promised to repay. Hamza, a Pakistani worker at a UAE oil storage compound, described a similar quandary after watching a drone hit a next-door facility. "We want to go back," he told journalists. "But we can't. Our families depend on us."
Wars eventually end, but debt spirals, education is interrupted, families are broken and industries that take months or years to rebuild will haunt the people of the Gulf long after the smoke clears.
- Frédéric Schneider
This dependency is chronic. However, the war — much like the COVID-19 pandemic before it — has both heightened and destabilized it. South Asian workers send home more than $100 billion in remittances annually, with roughly $50 billion to India and tens of billions more to Pakistan and Bangladesh. These flows sustain households, pay school fees and service debts across the subcontinent, but are drying up as the war causes an economic crisis across the Global South.
Some workers, like fishermen navigating Persian Gulf waters and delivery drivers photographed bringing food to doors amid strikes, work on commission. For these groups, the gigs have dried up as Western expats and tourists have fled hotels and restaurants. Unlike Gulf nationals, migrant workers bound under the kafala sponsorship system cannot freely change employers, access unemployment benefits or leave the country without their sponsor's consent. They are economically trapped, legally exposed, physically at risk and lack a social safety net and political voice.
Iraq sits in a particularly cruel position. Oil revenues fund 90% of state income. Yet southern field output has collapsed by 80%, from 4.2 million barrels per day before the war to roughly 1.4 million, pushing the government to the edge of a payroll crisis. There is no approved 2026 budget. Instead, Baghdad is operating on emergency monthly spending rules. Even before the war, low oil prices meant that the government had no sustainable revenue to fund public salaries. The precipitous war-induced drop in oil exports and government-formation woes have only exacerbated the problem.
The troubles with public-sector salaries are endemic. For example, during the Covid crisis, a Facebook group called "Our salaries are a red line" accumulated 270,000 members. Ahmed al-Safar, a member of parliament's finance committee, warned that delayed salaries would produce "popular frenzy and widespread demonstrations," a reminder of what happens when the state stops meeting its obligations to its people, and what the future holds if the current crisis persists.
Iran-friendly factions within the country have pushed for active solidarity with Tehran, while the U.S.-Israel alliance has unsuccessfully encouraged Kurdish factions to take up arms against it. Most Iraqis want no part of a conflict that threatens what little stability they have managed to rebuild. The resulting political tensions increase social costs and strain Iraq's fragile governing architecture at a moment when effective governance is both needed and impaired, resurrecting the specter of the 2011 Arab uprisings born out of similar circumstances.
Accounts of this war's economic consequences have been overwhelmingly absorbed with the concerns of Europe and North America: oil prices, recession risks and inflation in energy-importing nations. But the populations most directly affected are those with the least resilience. Wars eventually end, but debt spirals, education is interrupted, families are broken and industries that take months or years to rebuild will haunt the people of the Gulf long after the smoke clears.
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