Gulf Economies Brace for Impact as Oil Prices Dip Below $70 for First Time in 18 Months
Dubai, UAE – Oil prices dropped below $70 per barrel this week, marking the lowest level since early 2024, as global supply outpaced demand and economic slowdowns in key markets like China and Europe weighed on energy consumption.
The price slump is sending ripples across Gulf economies, many of which still rely heavily on hydrocarbons to fund national budgets — despite aggressive efforts to diversify through non-oil investments and public-private partnerships.
“The recent decline in crude prices is a reminder that energy markets remain volatile, and economic resilience will depend on how quickly Gulf nations can diversify,” said Rania Al Jassim, an economist based in Abu Dhabi.
OPEC+ Responds with Cautious Optimism
The Organization of the Petroleum Exporting Countries and its allies (OPEC+), led by Saudi Arabia and Russia, have not yet announced additional output cuts but signaled they are monitoring the situation closely.
In an official statement on Tuesday, OPEC+ noted that the price decline was “temporary and market-driven”, attributing it to a mix of seasonal demand shifts and geopolitical uncertainty in Asia.
Saudi Arabia’s energy ministry confirmed it would maintain current production levels at 9 million barrels per day, emphasizing stability over short-term reaction.
Impact on GCC Budgets and Projects
The drop in oil prices may complicate budget planning across the Gulf Cooperation Council (GCC), especially for oil-dependent economies like Kuwait, Oman, and Bahrain.
However, Saudi Arabia and the UAE are expected to weather the downturn better due to:
Strong sovereign wealth fund reserves
Continued momentum in non-oil sectors like tourism, logistics, and fintech
Diversified investment pipelines backed by Vision 2030 and UAE Centennial 2071
“The UAE has reduced its fiscal break-even oil price below $60. That gives it flexibility during periods like this,” said James Hall, an oil markets analyst at London-based Global Energy Watch.
Stock Markets React Across the Region
Gulf stock markets saw modest declines following the price dip:
Tadawul (Saudi Arabia) fell by 1.3% on Tuesday, led by energy and banking stocks.
DFM (Dubai Financial Market) saw a 0.8% drop, while ADX (Abu Dhabi) remained relatively flat.
QSE (Qatar Stock Exchange) fell 1.5% on concerns over LNG pricing.
Investors remain cautious but analysts say the market has priced in energy volatility as a long-term feature of Gulf economic planning.
Non-Oil Sectors Step into the Spotlight
With oil prices under pressure, regional leaders are doubling down on non-oil growth engines, including:
Tourism: Saudi Arabia hosted over 20 million international visitors in the first half of 2025.
Technology: The UAE launched a $500M AI innovation fund last month.
Green energy: Oman and Egypt have both signed new green hydrogen MOUs in Q3.
The diversification efforts reflect a growing belief that Gulf economies must prepare for a post-oil future — not just in policy, but in practice.
What’s Next? Watch These Factors
Analysts suggest watching the following key developments over the next few weeks:
OPEC+ meeting scheduled for late September — may include discussion of potential output adjustments.
US interest rate decisions — which influence global commodity prices and investor sentiment.
China’s economic recovery — as one of the top consumers of Gulf oil, Beijing’s industrial output will be closely watched.
Geopolitical events — including maritime disruptions in the Red Sea and regulatory changes in Europe.
Final Word: A Test of Resilience
While a dip below $70 may trigger short-term concern, many experts say Gulf economies are far better positioned today than during past oil shocks.
“This isn’t 2015. The region has built buffers, diversified revenue streams, and matured its financial institutions,” said Noor Haddad, head of MENA research at Nomura.
