El-Erian Warns of Global Economic Consequences of War: Gulf Investments in Jeopardy

SadaNews - Economic expert Mohamed El-Erian warned of the potential for a widespread shock to the global economy due to escalating tensions and war in the Gulf region, asserting that the repercussions will not be limited to the energy sector alone but will extend to encompass broader economic areas.

El-Erian explained in an article published in the Financial Times and an interview with CNN that the Gulf countries were playing a pivotal role in the global economy prior to the recent escalation, transcending their position as a primary energy supplier, as they have converted into important logistical centers and prominent tourist destinations, in addition to their role as a major source of global liquidity.

He pointed out that the countries of Saudi Arabia, Qatar, the United Arab Emirates, Bahrain, Kuwait, and Oman have succeeded over the past four years in achieving current account surpluses exceeding $800 billion, enabling them to enhance their presence as influential global investors. However, according to El-Erian, these investments are now threatened amid the ongoing war.

In this context, El-Erian considered that the prevailing market expectations regarding the possibility of the United States intervening swiftly to impose a ceasefire among the conflicting parties may be exaggerated. He emphasized that there is no "easy way" for U.S. President Donald Trump to withdraw from or end the war in Iran swiftly.

He added that the belief in the ability to impose an immediate solution on both Iran and Israel does not reflect the complexities of reality, especially at this advanced stage of the conflict, which increases the likelihood of continued economic repercussions in the near term.

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Trump's announcement of potential negotiations with Iran raises increasing questions in economic circles about whether this constitutes a tactical step or a "negotiating ploy" aimed at calming the markets or buying time.

In this context, the investment platform Kubeisi echoed the possibility of inferring U.S. administration behavior from previous crises, particularly the trade agreement with China that was reached in May 2025.

According to the analysis, markets had reached a "pain point" at that time, with the yield on 10-year U.S. Treasury bonds rising to over 4.45% at the end of April before Trump announced the start of negotiations with Beijing. Although the Chinese side initially denied it, an agreement on tariffs was subsequently reached after weeks.

The platform noted that the U.S. administration might currently be following the same approach but simultaneously warned of the ongoing uncertainty, confirming that market volatility would persist until a clear agreement is reached, and that a full recovery of markets could take several months amid what it described as a "historic shock".

For his part, Marco Kolanovich, a former executive at JP Morgan, considered the recent developments to have a "net negative impact" on the markets, warning that instability and conflicting statements could lead to a decline in liquidity while fundamental challenges remain unresolved.

He added that conflicting messages between the United States, Iran, and other parties necessitate investors to focus on a critical factor, which is the continued flow of oil through the Strait of Hormuz due to its pivotal role in stabilizing global markets.

Joseph Brusuelas, chief economist at RSM, noted that even if diplomatic efforts succeed, the stabilization of oil and gas prices will not be immediate, but may take months, with expectations that prices will remain at higher levels compared to what they were before the outbreak of the war.

He confirmed that the end of the conflict does not mean an immediate return of oil and refined product flows to their previous levels, which reinforces the likelihood of continued pressures on global markets in the coming period.