'Adapt to higher prices', UN official warns amid Hormuz standoff and threat of new war

The Iran war and the standoff in the Strait of Hormuz have upended life across the Middle East, forcing governments and people to adapt to a higher cost of living at a pace that would normally take decades, a UN official has warned.

Abdullah Al Dardari, UN Assistant Secretary-General and Director of the Regional Bureau for Arab States at the UN Development Programme, told The National how the conflict has rapidly reshaped priorities across the region.

He was speaking in Bahrain on the sidelines of the annual Manama Dialogue forum, which this year focused on the far-reaching implications of the US-Iran conflict amid growing fears of another full-scale war.

People across the region will have to adjust to rapid changes as their governments try to rebuild what was destroyed and navigate the standoff in the strategic Strait of Hormuz, the UN official said.

"People now have to adapt to less subsidies, higher prices and more taxation -- transformations that take decades are now happening in a few months," he elaborated.

The war with Iran has delivered the deepest oil and gas shock in modern history, deeper than the crises of 1974 and both Gulf Wars. Yet its effect on prices and markets has been far milder than in previous episodes, the International Monetary Fund had said.

However, Mr Al Dardari explained that countries in a new categorisation of "rich but fragile" have shifted priorities after suffering the consequences of the Iran war.

"We're used to the former classification of oil rich or oil poor... but now we have a new category called rich but fragile and that is a category which is still better situated than countries like Lebanon and Syria so they still have financial buffers," he added.

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Containers and debris seen floating near the Strait of Hormuz

Mr Dardari said decades-long "over reliance" on the Strait of Hormuz, through which a quarter of global shipping flows through and which has been disrupted by a double blockade by Iran and the US, made countries "complacent".

Some, he suggested, fared better than others, but overall the Middle East took a massive shock, losing seven per cent of GDP annually. "So the entire growth of 2025 was lost," adeed the UN official. This has caused the "rich but fragile" states to rethink their priorities, focusing inward rather than on middle-income countries that had relied on cash injections for survival.

He gave Lebanon and Syria as examples, which were already struggling. "The problem is that the countries that used to have the money to inject have to worry about themselves and rebuild what was destroyed."

Widening gap

Fears that a return to a war between the US and Iran, despite efforts at repaving the road to diplomacy, have resulted in US travel advisories to nearly all the countries in the region as well as the pulling out of US officials from places like Saudi Arabia, which has been under regular Houthi attacks in recent weeks.

Meanwhile, US President Donald Trump has claimed that the war would be "wrapped up soon".

Mr Dardari said he shares in the worry that the war could return, but also stated that this would only dramatically deepen the existing problems which have resulted in four million people joining the poverty lines and four million others becoming unemployed in the region, according to UN data.

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IMF's Jihad Azour on the deepest oil shock in history and the region's road to recovery

According to the UN official, Gulf states have shown a "high level of responsibility and seriousness" in improving regional connectivity to circumvent the impacts of the closure of the Strait of Hormuz.

In June, the GCC and the UNDP held a roundtable in Riyadh, which focused on strengthening resilience and deepening co-ordination between the states and their neighbours. Further meetings were held on the sidelines of the UN General Assembly (UNGA) last month. Mr Dardari said the EU has also expressed interest in joining, and Turkey already agreed to join. "So we’re hoping more arteries open more opportunities, competition, productivity and technology."

With the gap widening between the 'haves' and the 'have-nots' given the Iran war, technological advancements, and the lasting impacts of conflicts in the region, the question is whether some countries will be left behind.

Mr Dardari argued that that is not the case. "During the UNGA (General Assembly), you’ll be surprised by the high importance of Palestine and Gaza in behind-closed-doors meetings – always, not just sometimes, ahead of Hormuz," he said. "So, the region realises that the essence of the problem [in the Middle East] is still in Palestine."

In fact, Mr Dardari alluded to the upcoming Arab Human Development Report, coming out next year, 25 years after its prior issue, which found that the region completely changed after the war in Gaza, where 74,000 Palestinians have been killed in Israel's war, and 80 per cent of the territory lies in ruins as aid continues to be largely hindered from entry.

"And this is before the war with Iran. I think recent events just confirmed that," he said.