The Middle East is caught in the middle of a global trade war that is showing no signs of slowing down. The battle between the United States, China, and the European Union is throwing economies into uncertainty, hitting stock markets, and shaking up trade policies.
Donald Trump is back in office, and his aggressive stance on tariffs is causing ripple effects across the world. While the region has avoided direct tariffs so far, its heavy reliance on oil, dollar stability, and global trade flows makes it vulnerable.
Steel and aluminum tariffs imposed by the U.S. in recent years have had little impact on the Gulf region, which accounted for 16% of America’s aluminum imports in 2024. Most of that came from the United Arab Emirates and Bahrain.
The real problem, however, is the oil market. If a trade war drags down global demand, oil prices will take a hit. That’s a serious concern for Saudi Arabia, the UAE, and Qatar, where oil revenue is still the backbone of their economies.
Oil prices, currency risks, and rising debt hit the Middle East
The U.S. dollar has been dropping since the start of the year, making imports more expensive for Middle Eastern countries whose currencies are pegged to it.
That includes Saudi Arabia, the UAE, Oman, Bahrain, and Qatar. If U.S. tariffs strengthen the dollar over time, oil prices will rise in the short term. But lower demand caused by trade slowdowns could erase those gains.
“The macro outlook for MENA is set to be weighed down by global tariff uncertainty indirectly through oil prices, to the extent that tariff and macro uncertainties continue to be a drag to Brent oil prices,” said Carla Slim, an economist at Standard Chartered.
Since the 2014 oil crash, Gulf nations have launched diversification programs to reduce dependence on oil revenue. Saudi Arabia has Vision 2030, while the UAE is pushing into crypto, artificial intelligence, and finance. Despite these efforts, oil still dominates.
“Oil still accounts for the largest single share of income,” said Edward Bell, chief economist at Emirates NBD.
The trade war isn’t just about tariffs. It’s affecting global trade flows, and the UAE’s logistics and shipping industry is feeling it. As one of the world’s biggest trade hubs, Dubai relies on global shipping.
A slowdown in international commerce means Jebel Ali Port and the UAE’s free zones could see lower traffic, affecting revenues across multiple industries.
Debt is another issue. Countries like Lebanon, Egypt, and Jordan are already struggling with high levels of external debt, much of it denominated in U.S. dollars. A stronger dollar makes it more expensive to service that debt, and these economies are already dealing with rising inflation and weaker currencies.
Jordan is in the worst position. Nearly 25% of its exports go to the U.S., mostly textiles and jewelry. If Washington decides to expand tariffs, Jordan’s economy will take a hit.
“Jordan’s economy is the most exposed to potential tariffs,” said James Swanston, an economist at Capital Economics.
However, Jordan has strong diplomatic ties to Washington, and Swanston suggested that those ties could help secure exemptions from potential trade penalties.
The Middle East is looking to Asia as trade corridors change
The trade war has forced countries to find new partners, and the Middle East is turning to Asia. With China’s Belt and Road Initiative expanding, the GCC-Asia trade corridor is growing.
“For MENA, we think this will add impetus to fast-growth trade corridors, such as the GCC-Asia trade corridor which has experienced long-term growth of 15% and stands to benefit most,” said Carla Slim.
This shift is bringing new investments. More Asian businesses are opening offices in the Middle East, and Chinese firms are expanding their regional presence. Financial ties between the Gulf and Asia are strengthening as well.
“The rise in trade volumes is leading to increased financial and investment flows, particularly as Asian companies set up in the Middle East or expand existing operations,” Slim added.
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