Before the Iran war, a huge amount of the fossil fuel consumed around the world passed through the Strait of Hormuz, including 34 percent of the crude oil, 19 percent of the liquefied natural gas, and 16 percent of the refined petroleum. Whether the Persian Gulf region will remain so central to the global economy once the war ends is an open question. As the world struggles with the immediate disruptions, the long-term winners and losers of the war are only beginning to come into view.

Is the Persian Gulf’s economic model in jeopardy? Will China benefit from a broader global shift to renewable energy? And how is the U.S. economy affected overall by the war?

Before the Iran war, a huge amount of the fossil fuel consumed around the world passed through the Strait of Hormuz, including 34 percent of the crude oil, 19 percent of the liquefied natural gas, and 16 percent of the refined petroleum. Whether the Persian Gulf region will remain so central to the global economy once the war ends is an open question. As the world struggles with the immediate disruptions, the long-term winners and losers of the war are only beginning to come into view.

Is the Persian Gulf’s economic model in jeopardy? Will China benefit from a broader global shift to renewable energy? And how is the U.S. economy affected overall by the war?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: Several countries in the Gulf have developed an economic model that depends on serving as a hub of international human capital, specializing in various types of high-end services. If this region isn’t secure, does that put this model into jeopardy? Is that the foundation of this entire economic concept?

Adam Tooze: You can see the force in that argument. Dubai appears as a tourist economy probably largely from a European point of view. It’s notoriously so in Britain. Apparently, there were a whole bunch of articles about how crazy the Brits are about Dubai, both positively and negatively. It’s both loved and hated. I think from the point of American listeners, they won’t think of Dubai necessarily as a tourist destination, but it is a popular spot for Europeans because of reliably warm weather in the winter, and it’s reasonably close.

But in terms of the economy, the highest figure I’ve seen for Dubai tourist share is less than 10 percent of GDP. So Dubai really is a commercial center: banking, trade, finance, insurance, all those kinds of things. And there’s no doubt, of course, that they will take a hit from the shock of the war. Real estate is another key component. The wealthy of the whole world like to have apartments there, very low-tax, kind of a haven status, if you like.

But I think there’s a tendency toward skepticism when we’re talking about services in general, sort of what’s its basic means of support. It doesn’t make anything. So sooner people feel insecure, somehow it’ll all evaporate. I’m not going to try and predict Dubai’s GDP 10 years from now. But one shouldn’t underestimate the resilience of hubs like this.

The sense that this is simply going to evaporate underestimates the central role the Gulf states play. Only in really, really bad scenarios does some form of relatively normalized traffic through the straits not resume at some point. This war is, after all, gratuitous. It should not have happened. There is no........

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