This analysis was written for a Spring 2026 Special Report on the repercussions of conflict on local economies

On March 30, 2026, acting president of Syria Ahmed al-Sharaa, flew to Germany to discuss the return of Syrian refugees, post-war reconstruction, and economic cooperation with Chancellor Friedrich Merz and President Frank-Walter Steinmeier in a visit aimed to strengthen bilateral relations and secure investment, focusing on Syria’s economic stabilization.

It was only the second visit of a Syrian head of state to Germany after then-chancellor Gerhard Schroeder afforded a controversial welcome to Syria’s now-deposed Bachar Al-Assad to Berlin in 2001. At the time, a German proposal for “change through [economic] collaboration” and a peace plan for the “Near East” were discussed amidst ruckus over reported anti-Semitic ranting by the Syrian ruler. In hindsight, there can be no denying that subsequent progress towards peace through an immediate halt to violence and “essential” restoration of trust between the government of Israel and the Palestinian Authority along the lines of a Sharm-El Sheikh agreement from 2001 (referred to in Germany as Mitchell plan) didn’t come to be. Instead, the official German ambassadorial presence in Damascus was suspended from 2011 to 2025 and economic sanctions were imposed in response to brutal oppression of the Syrian population by the Assad regime.   

This time, the hope was for a very different outcome, even as the regional context was deteriorating from severe to disastrous. Around the time of al-Sharaa’s Berlin visit, US President Donald Trump started threatening Iran with a bombardment “into the stone age” and an erasure of Iranian civilization overnight. Closer to Syria, the Israeli settler assaults against their Arab neighbors in the West Bank were reaching fever pitch. The number of civilian casualties under the Gaza ceasefire remained unconscionable. The IDF targeting of Hezbollah operatives in Lebanon was relentless and far beyond the scope of international law precedents with destruction and damage of 62,000 housing units between March 2^nd and April 22^nd, according to the Lebanese National Council for Scientific Research (this is in addition to the Ministry of Environment’s estimate of 200,000 damaged and decimated homes between 2023-2025)  and mounting civilian casualties beyond measure. And Iran tightened its grip on Hezbollah decision-making in Lebanon.   

From a big picture perspective, things this April 2026 look very different for al-Sharaa’s Syria, in sharp contrast to the regional turmoil. The country was mostly spared not only cross-border military assaults; the risks of new conflict seem subdued and the investment climate appears the most benign in many decades.

The new narrative of Syria is, however, still untested. When the Assad regime collapsed on 8 December 2024, Syria stepped out of 13 years of civil war and economic isolation and into what its transitional president has hyperbolically called “a land of opportunities.” Prospective investors, primarily from the Gulf states, are presumably well aware that the gap between the promise and the reality of Syria’s economic reconstruction is vast. Moreover, so far there are no signals of Arab investor reticence in face of a regional context that has become increasingly complicated, as a result of the joint US-Israeli war on Iran and its complexification of the very regional dynamics that were supposed to hasten the development opportunities for the new friends of the hegemonic power axis Washington-Tel Aviv-Riyadh.

Meanwhile, prospects for regional integration with Lebanon are simultaneously and paradoxically poised for growth and weighed down by the Israel-Hezbollah war systematically demolishing its south, devastating more than just the southern suburbs of its capital city, and shoving the country towards deeper internal divisions amid mass displacement and extreme loss of lives, land and livelihoods. Geography and history indicate that future investments into Syria will have massive implications for the – significantly smaller but also significantly more mature – Lebanese economy. This suggests that Israel’s actions in Lebanon make for an additional complication of any Syria investment gambit. Syria’s position of cautious neutrality might be safeguarding new investments, but the turbulence of the region at large is raging ever closer.

The Gulf bet

One challenge for investors looking to gauge the Syrian economy is that it cannot be confidently measured. A March 2026 policy brief released by the Syrian Center for Policy Research (SCPR) found that the Sharaa government presents indicators of economic performance which imply a rapid recovery of GDP and an imminent return to pre-conflict levels. These governmental data, published without a clear methodology, did not distinguish between GDP at current prices and constant prices, or clarifying the effect of multiple exchange rates and inflation on the announced value. According to SCPR, the use of undocumented macroeconomic indicators hints at possible exaggeration of potential investment returns. It reveals the marginalization of the national data system and the treatment of GDP as an instrument of political discourse, which is not likely to improve investor confidence or public trust.

The SCPR estimates that real GDP in 2025 achieved only nominal growth of about 0.3 percent compared with 2024, while real GDP per capita declined by about 6 percent. The less than impressive bottom-line performance of the first full year under a new government is owing to weak organic growth combined with strong population growth associated with the return of refugees. The actual size of GDP in 2025 did not exceed about 45 percent of its 2010 level at constant prices.

Absence of recent organic growth (coming from investments of domestic savings and/or governmental budgets and economic stimuli), expanding, youth driven market size, and massive demand for anything from housing and infrastructure to consumables in principle denotes both a vacuum of unmet household needs and a fantasy scenario of virgin investment. Into this void, Gulf states have moved in speedily and ambitiously. Qatar, Saudi Arabia, and the UAE were among the first nations to endorse Syria’s new leadership, with President al-Sharaa invited to visit all three countries multiple times since taking office in a bid to secure economic support. Major commitments include a $7 billion energy infrastructure deal led by Qatar’s UCC Holding, a $6.5 billion aid pledge from international donors, and an $800 million port development agreement with Dubai-based DP World.

Already in the first half of last year, Syrian investment projects by potent Arab economies were piling up impressively into aggregate numbers not previously reported from Syria. At the Syrian-Saudi Investment Forum in Damascus in July 2025, 47 initial agreements and MoUs were signed between Syrian state institutions and Saudi companies, with a total value of $6.4 billion, covering infrastructure and real estate development, telecommunications, information technology, industry, tourism, and health. This is according to a September 2025 report by the New Zealand-based consultancy Karam Shaar, which covers Syria’s political economy.

Not only Gulf governments but also Arab-led transnational development action forums such as the Future Investment Initiative (FII), a sort of desert power play on the tiring Davos paradigm of the World Economic Forum, have shifted into high investment promotion and readiness gear. At the FII conference in Riyadh in October 2025, al-Sharaa announced that Syria had attracted foreign investment pledges estimated at around $28 billion during the year, with signed contracts nearing $14 billion, focusing on infrastructure, transport, and several major development sectors according to North Press Agency.

BOX

Perhaps the ambitious scope of Arab corporate investment into future Syria is most physically visible at Damascus International Airport, the country’s primary gateway. Qatar-based conglomerate UCC Holdings’ $4 billion redevelopment and expansion program of the crucial aviation facility — one of the flagship deals anchoring the investment surge — is already underway. Younes Sayed, a Paris-based architect who is serving as program manager and lead architect on the project, describes an endeavour that is self-consciously about more than runways and terminals.

“The objective is not only to re-establish Damascus as a regional hub, but to position it at a continental and even international level, by aligning with global standards in terms of capacity, connectivity, and passenger experience,” Sayed tells Executive. The project is a phased modernization of Terminals 1 and 2, with a future Terminal 3 designed in collaboration with Zaha Hadid Architects and Dutch aviation consultancy NACO — a pairing that signals the al-Sharaa government’s intention to project international-class ambition to potential investors and diaspora returnees alike.

Sayed acknowledges that the project is “evolving in a complex environment,” deploying a fast-track approach that runs design and construction in parallel to maintain momentum despite what he calls “ongoing changes,” an understatement for the US-Israel war on Iran which is hurting Gulf Cooperation Council (GCC) economies and could threaten their investment commitments.  He is pragmatic about timelines: “All stakeholders are making every effort to ensure that the current situation does not lead to delays. We are continuously adapting to evolving conditions and adjusting our planning as needed.” Asked about the project’s connection to the country’s broader reopening, Sayed is optimistic, stating that the airport’s renovation and expansion is “a strategic catalyst that, if aligned with broader stabilization, can significantly contribute to reviving tourism and restoring Syria’s position internationally.” But, he emphasizes, that outcome depends on a set of preconditions — stability and security, resumed airline connectivity, and, crucially, restored investor confidence in tourism, hospitality, and services.

The issue of underdeveloped economic infrastructure is a heavy caveat. The scale of announced investments far exceeds Syria’s underlying economic capacity: the value of MoUs ($25.4 billion) dwarfs total government investment expenditures between 2010 and 2024, which, according to Karam Shaar’s September 2025 report, stood at $16.6 billion. These are not the conditions of an economy on the cusp of absorbing tens of billions in foreign investment.

END BOX

The war on Iran, Syria’s precarious insulation, and Gulf disillusionment

No factor has more immediately reshuffled Syria’s investment calculus than the US-Israeli war on Iran, which erupted in early 2026. But already before this regional and global shock event, Sharaa-led Syria has taken steps to curtail Tehran’s influence within and without its territory, including limiting Iran-aligned armed groups, tightening controls along Lebanese and Iraqi borders, and cracking down on smuggling networks long used to move weapons, cash, and supplies to Hezbollah.

Caution was also evident on the part of prospective Arab partner states such as the Gulf Cooperation Council (GCC). The GCC’s approach has been deliberately conditioned: the first GCC-Syria joint ministerial meeting in Makkah in March 2025 emphasized that disarming militias and concentrating weapons in state hands would be an important part of Syria’s reintegration into the Gulf’s security architecture. Gulf investment is based on a wager that a stable, Gulf-oriented Syria is worth the political risk. It must not be forgotten that Syria’s relations with many Arab states have historically been no less complicated than those with states in the EU, such as Germany. 

While the successful recalibration of Syrian external relations cannot be seen as a cut and dry affair – far from it – there are signs that this rapprochement strategy is bearing fruits not only in big infrastructure projects but also in vital services, such as the financial services sector. Lebanese banker Riad Obegi, a senior executive at Bank Bemo Saudi Fransi — Syria’s largest private conventional bank — offers a banker’s reading of Damascus’s position in the regional constellation. “Apparently, the Americans have said that the Syrians should be left out [of the conflict],” he tells Executive. “The whole region is in turmoil but Syria — it is as if it is in Europe.” From his vantage point, Syria’s deliberate distancing from the Iran axis, and the tacit US endorsement of the transitional government, is providing a degree of fortuitous geopolitical insulation.

The economic disturbances from the Iran conflict, however, are harder to insulate against. The conflict has driven a sharp rise in global energy prices and disrupted key shipping routes through the Strait of Hormuz. But old export routes for Syrian hydrocarbons, which could ride profitably on the Hormuz conundrum, have been degraded over the decades that the Assad regime had been sanctioned and negligent in preserving fossil fuel assets. Amid this maelstorm, Syrian media organization Enab Baladi reported that as of March 31, 2026, Iraq has reopened the al-Waleed border crossing with Syria, enabling crude oil to be transported across Syrian territory to the Mediterranean, with an estimated 500 tankers expected to pass daily via the al-Tanf crossing towards the Baniyas terminal for onward export.

Activation of Syrian oil was also proposed in a presentation by US Special Envoy to Syria (and US ambassador in Ankara) Tom Barrack during a March 26 conference in Washington hosted by the Atlantic Council and Syrian American Business Council. The idea floated by Barrack – and also reported by Enab Baladi – was to revive the concept of Syria and Turkiye as joint energy centers in The Four Seas corridor first theorized in 2009. A dual Turkish-Syrian hub for transporting crude oil and gas would theoretically link the Arabian Gulf, the Mediterranean Sea, the Caspian Sea and the Black Sea, and—conveniently for Washington-affiliated opportunists—serve as an alternative to the Strait of Hormuz.

The broader context of the Iran conflagration is not only major hits to GCC economies, but also a fracturing of the strategic architecture that ties Gulf states to the US government and, by extension, to American-backed regional security. With the launch of the first missiles and bombs on February 28 of this year, Gulf states were dragged into a war they never chose, to serve an agenda that was never theirs, while their security was traded away to protect Israel rather than them — a reality that has fundamentally exposed the true nature of Washington’s alliances in the region. This erosion of trust in American reliability might be, paradoxically, a structural tailwind for Gulf investment in Syria. As the US security umbrella proves unreliable and Israeli aggression generates its own blowback, the Gulf states’ incentive to build self-sustaining regional economic architectures — with Syria as a key node — has intensified.

Syria’s Banking System: The Foundational Bottleneck

If geopolitics frames the macro-context, the banking system is one of Syria’s most immediate structural bottlenecks. No reconstruction investment can be effectively deployed, and no investor can repatriate returns, without a financial sector that meets international compliance standards. The International Monetary Fund (IMF) warns that lifting legal sanctions does not automatically translate into Syria’s return to the global financial system — due to ongoing de-risking policies whereby international banks avoid dealings with post-conflict countries because of weak compliance systems, money-laundering risks, and a lack of institutional transparency. The IMF’s February 2026 staff visit to Syria cited a small fiscal surplus and tentative stabilization, as well as improved exchange-rate conditions alongside authorities’ steps toward introducing a new currency framework to address distortions in the monetary system.

Bank Bemo Saudi-Fransi’s Obegi has a front-row seat to this transition. Bank Bemo Saudi Fransi — a joint venture between Lebanon’s Bank Bemo, Saudi Arabia’s Banque Saudi Fransi, and Syrian shareholders — is the largest private conventional bank in Syria, and holds stakes in two other Syrian banks. His assessment of the current landscape is guardedly optimistic. “Syria is no more sanctioned. The Caesar Act has been withdrawn,” he says. “It is true that international banks are not yet coming; they are waiting a little bit. But things are improving by the day.” He draws an analogy that practitioners will recognise from any frontier banking market: “We take our decisions quite slowly, but the day we take the decision we like to act fast. It is a necessary inertia, but it will come. International banks are going to come in droves to Syria.”

“The regulations are much better in Syria than they are in Lebanon,” says Obegi, who is intimately familiar with both regulatory regimes. “You do not have as much professionalism [in Syrian banks] as in the banks in Lebanon. And what is strange is that on the other hand, the regulations are much better in Syria than they are in Lebanon.” The implication is that Syria’s banking framework, while underdeveloped in human capital and balance sheet depth, has not been embroiled in a state level corruption scheme the way Lebanese banks have. Crucially, he notes that Syrian depositors, unlike their Lebanese counterparts, “did not lose any deposits” in the crisis — a distinction that preserves a baseline of institutional trust that Lebanon has catastrophically squandered.

Syria’s reconnection to global payment system SWIFT in November 2025 after a 14-year suspension is also a step forward. The demand side of the equation, however, is a work in progress. “The Syrian clients were not accustomed to working with banks,” Obegi explains. “Until 2004, there were very few banks. Syrian clients preferred either to be their own bankers or to bank in Lebanon. After 2004, Syrians began to work with banks but the rate of bancarisation was not very high.” He sees mobile telephony as the accelerant that will compress the timeline for broader financial inclusion: “If you look at the penetration of mobile phones in Syria, it happened relatively fast. You have to expect that banking will follow. It will take maybe 4-5 years before bancarisation is comparable to Lebanon.”

His broader prediction, taking stock of Gulf investment movement into Syria is that,”what is going to happen to the banking sector in Syria is going to be the locomotive for the finances in the Levant.” According to SCPR’s March 2026 report, gaining sustained investor confidence will require a credible anti-money laundering framework that is implemented rather than merely promulgated; transparent and enforceable property and contract rights backed by a genuinely independent judiciary; consistent regulatory practice by the central bank freed from political interference; and the reconstruction of an independent and transparent national data system as a primary precondition for recovery.

Global Competition, Regional Integration, and Lebanon

Syria in April 2026 occupies a paradoxical position: simultaneously the most talked-about investment frontier in the Arab world and one of the least investor-ready economies on earth. The SCPR’s data are unsparing: real GDP at 45 percent of its 2010 level, agricultural output in near-collapse, manufacturing at one-fifth of pre-war capacity, and governance structures treating economic statistics as propaganda instruments. The $28 billion in pledged investment is a signal of regional intent, though not necessarily a bankable pipeline.

What Syria has working in its favor is a convergence of factors that did not exist three years ago: full sanctions relief, Gulf patronage now marked by deepening disillusionment with American reliability, a transitional government that has adopted the rhetoric and some of the substance of reform, and a regional conflict that has, so far, spared Syrian territory while possibly elevating its value as a transit corridor. Flagship projects like the Damascus airport expansion demonstrate that serious international professionals are betting on Syrian recovery, even while managing the contradictions of a fast-track approach in a still-fragile state.

Factors of attractive investment return potentials, strategic territorial alliances, and cultural affinity have visibly positioned public and private (and public-private) Arab investments on advantageous starting blocks for capitalizing on the Syrian economy. Within the opacity of conflict timelines, what can be predicted is that competitors for the Syria-plus development opportunity will hit the ground running from the moment that the lose-lose logic of regional war will be overtaken by the more pragmatic logic of economic competition and political coexistence. The question of whether political signals by European governments will be strong enough to overcome perception risks on the Syrian side and old or new colonial attitude barriers on the European side, cannot be reliably gauged.

Syria’s most consequential if not deeply complex near-term economic relationship is with Lebanon, and both Sayed and Obegi point to signs of pragmatic re-engagement even amid political complexity. Strictly segregated development paths in the face of synergetic development needs do not seem to make sense. Banking and financial services on the other hand could offer entry points.

Obegi notes that Lebanese banks were the dominant private foreign players in Syria after the 2004 liberalization — Bank Byblos, Bemo, and others moved in on the assumption that Syria was Lebanon’s natural hinterland for financial services. For the experienced banker, this historical flow of financial interest is now on the cusp of being inverted.

Sayed, working on the Damascus airport project, describes what he sees from the ground level of a practical cross-border professional: “There are clear signs of a gradual and pragmatic re-engagement between Lebanon and Syria, although it remains complex and cautious. Recent dynamics suggest a willingness on both sides to rebuild more institutional, state-to-state relations based on mutual interests such as border management, economic exchange, and security coordination.” He qualifies this carefully: “At this stage, it is more a form of pragmatic cooperation than a fully structured strategic alignment.”

Obegi, whose bank sits at the intersection of Lebanese, Saudi, and Syrian capital, points to the deep financial interdependencies that predate the political rapprochement. “There is a lot of closeness between Lebanon and Syria. In the banking sector, if you look at the 40 banks in Lebanon, you have at least five banks owned by Syrian-origin people. There are also a lot of trading companies in Lebanon that are Syrian-owned.” The directional flow of capital, he suggests, is about to reverse: “Before the problems in Lebanon, Syrians banked in Lebanon. I guess now Lebanese will bank in Syria.”

Energy integration may be the most tractable entry point. Lebanon, currently deadlocked by bombardment and delayed reform, could, in a so far still distant peaceful future, explore the potential of joining interconnection initiatives with Syria, Jordan, and Egypt, and reviving negotiations on electricity connectivity — projects previously strangled by Caesar Act sanctions that penalised any entity transiting Syrian territory.

Meetings between Lebanese Prime Minister Nawaf Salam and President Sharaa in April 2025 in Damascus and July 2025 in Qatar, as well as a September 2025 meeting with Lebanese President Joseph Aoun, among other phone calls and videoconferences, have convened on border management, refugee affairs, and economic cooperation, reflecting a strategy of pragmatism and institutionalism focused on practical issues directly affecting security, economy, and society. Unresolved grievances persist, such as the over 2,000 Syrian detainees held in Lebanese jails, though local news reported that Lebanon has begun a process of returning around 300 of them in mid March 2026.

Obeji flags a macro constraint that overhangs all of these dynamics: “The war with Iran is not a small thing. Not only because Iran is a large country of 100 million inhabitants with a lot of natural resources, but also because it has repercussions with China. As long as this is not resolved, we are not going to have clear-cut advances.”

This analysis was written for a Spring 2026 Special Report on the repercussions of conflict on local economies

For a group that is as notoriously divisive in their analyses and divided in their predictions as the global top-gun advisory class of economists, the consensus is glorious. The current global economic climate worries all expert voices into pointing to gathering storms of universal uncertainty. But this unanimity on the global economy in spring of 2026 is nothing glowing. It is only gloriously universal. The analogy? Everyone takes notice of a deliberate mega-truck crash. 

The economic hurricanes of spring 2026 have been attributed overwhelmingly to one pivotal event and a single point of origin: the US-Israeli “preemptive” war on Iran and the resultant and predictable confrontation in Arabian Gulf maritime trade with its bottleneck at the Strait of Hormuz. Beginning with the strike against the Iranian supreme leader and the short-lived justification of targeting regime change for the liberation of the Iranian people, analysts of short-term economic estimations and predictions into a cacophonic chorus chanting “risk”.

Most of these downward risk alerts stem from the underestimated economic impact of war in the Middle East. Some, however, carry over from warnings already raised last year.

In this multi-year context, the outlook carries different weight for different economies. High-income countries — around 65 UN members and 20+ small territories — will feel the strain but are better positioned to cope. For low-income and least-developed nations, the outlook reads like a horror story. And for the more than 100 countries stuck in the ‘Middle Income Trap’ for two decades or more, it is deeply alarming.”

The message for the last group of countries appears to be that their inclement geoeconomic climate outlooks of the 2020s have been further negatively accentuated in March and April of this year by sudden, unpredictable and often contradictory swings of hyper-sensitive economic indicators that will badly affect them. This is the case even though these were distant swings driven by actions and harsh threats entirely out of their control.

The granular picture

In step one of shock impacts from the Iran war, global markets internalized their uncertainty by fluctuating. The first big swings were seen in markets for crude oil and gas, with leading oil prices surging month-on-month from end February to end March by around $35 and $23 for the two benchmark categories Brent & West Texas Intermediary (WTI). By the end of March, and specifically in the wake of political remarks at that time, crude oil prices leapt up about 40 (WTI 30) percent per barrel (bbl).

Moreover, the volatility continued throughout the month of April. Not only were crude oil prices skyrocketing by approximately 20 further percentage points over the course of the full 61 days from Feb 28 to Apr 30, vacuous political and security rhetoric was additionally mirrored in two temporary price drops from more than $100 bbl to less than $90 (and back up again) in March, and two further massive swings in April.

That rigmarole was enough to ring inflation alert bells in global oil markets and it did, loudly. But already before the first bells over the price increases of March 2026 even stopped ringing, international crude prices reverberated in the form of inflationary influences across developing and developed, national energy and transportation sectors. In the developed world, notorious price jumps were flagged by media from gasoline at the pump in the US to heating oil prices predictions for the UK winter that is at least half a year away. Yet, such sensational developed market consumer shocks were just the starting shots of serial worry signals ringing out perhaps more quietly but also more seriously from countries around the world.

Normally attracting at best minor attention in daily reporting, prices for industrial feedstocks and chemicals, as well as the rare gas helium produced as sideline by-product of natural gas extraction, rose at varying speeds and peaks. Apart from helium that is crucially required in medical and technical manufacturing, industrial manufacturing commodities such as ammonium, naphtha and Sulphur, benzene, and styrene, ethylene, propylene and methanol suffered inflationary pressures. All this extreme volatility and peaking of source prices, which occurred in tandem with Strait-of-Hormuz related supply disruptions, continued on international markets through the month of April and into May as of the time of this writing.

National-level repercussions were felt, with wide differences, across countries on all six permanently populated continents, in sectors from travel to healthcare, hospitality to manufacturing, mortgage finance to agriculture. Quickly, international organizations engaged in the fight of improving food security for the global precariat, rang their own alarm bells. International NGO Mercy Corps warned in mid-April “The food security consequences of this war are already written into harvests that have not yet been planted.“

Price inflation in energy markets drew the heaviest attention but price spikes and supply disruptions for commodities swapped further: they surfaced as volatility across equities markets, drove up costly bond yields, impaired mortgage rate outlooks, impacted currency markets and consumer price trends. In the two-month bottom line, inflation pressures and economic demand-supply twists since outbreak of the Iran war have by end of April hurt many economic actors and favored some.

The lesson of it all might forcefully remind the peoples of the world of the intense interdependence and interconnections of the globalized economy. After a month of war, immediate inflationary pressures and turnover contractions were reported from the most ostentatious boudoir of the rich as well as the most private bedrooms. Specifically, the CEO of a leading global market producer of condoms in Malaysia warned in late April of impending 20 to 30 percent price increases for their products that would obstruct household family planning mostly in poor populations. About a week earlier, the head of conglomerate LVMH warned of an impending crisis of the group – under whose umbrella such symbols of wealth as Bulgari, Dior, Givenchy, distillery Hennessy, Kenzo, Louis-Vuitton, winery Moet, Tiffany, etcetera are held – if the Iran war does not find its end quickly.

Profiteers of the Iran conflict include energy companies, defense exporters, stock exchanges, investment banks, financial advisors, management consultants, currency and commodity traders, prediction market platforms, and renewable energy firms — though their gains stem from a mix of causes, not solely the conflict itself.

“It’s clear that artificial intelligence, global fragmentation and inflation will continue to permeate through economies and the markets,” comments financial group JP Morgan, one of the large banks writing extraordinary profits in the first quarter of this year (net income was up 13 percent year-on-year to $16.5 billion), says in its 2026 mid-year outlook. Premiums on security and technology moreover are expected to persist and governments, corporations, and wealthy citizens are demonstrating their willingness to pay extra for being warned against an economic shock, according to JP Morgan’s May 8^th statement.

According to Kriti Gupta, global investment strategist at JP Morgan Private Bank, energy risk premiums, unrelenting inflation ranges, and security-driven rerouting of supply chains are likely to sick to markets over long term.

In its dichotomous way, the story of the Middle East 2026 shock thus reiterates how the value of the markets is that of a universal decentralized computer with an operating system coded by utility and profit. Thus, as much as the logic of social values and human priorities has been impaired by all that was instigated by each and every conflict actor, large and small, state and non-state, in the Iran war, the capitalist logic of the markets emerges unscathed.

 A strong voice in the midst of even stronger winds

It would be spurious to assume that this narrative unfolded without throwing its shadows ahead. At time of this writing, the assessment of impending risk accumulations of inflation, technology, global competition and even trade wars  are confirmed by the International Monetary Fund (IMF), arguably the world’s most vocal and best-reputed public economy powerhouse. But already in advance of the IMF 2026 spring meetings, three international agencies of import – IMF, World Bank, and the International Energy Agency – announced the formation of an action group to monitor developments, align analysis, and coordinate support to policymakers to navigate this crisis.

“At these times of high uncertainty, it is paramount that our institutions join forces to monitor developments, align analysis, and coordinate support to policymakers to navigate this crisis,” a joint statement of IMF, WB, and IEA said on April 1.

The IMF’s latest analysis of the world economy is augmented by a critical term that puts the situation in context of uncertainty. “After withstanding higher trade barriers and elevated uncertainty last year, global activity faces a major test from the outbreak of war in the Middle East,” reads the laconic opening statement of the April 2026 World Economic Outlook (WEO) on the IMF homepage.

Uncertainty is the huge caveat in the IMF’s scenarios for 2026. Even the WEO’s less pessimistic scenario, described as a reference forecast and apparently based on a lot of hopeful assumptions, predicts a slowing of global growth to 3.1 percent – modestly revised downward versus a scenario of 3.3 percent not even six months ago. Twenty basis points may sound inconspicuous but comes to an amount north of $250 billion over a World Bank/IMF global nominal GDP estimate of $126 trillion at the end of this year. Headline inflation is expected to rise to 4.4 percent, in the best case.

On top of representing a lower growth expectation than economies achieved in the past two years, this prediction acknowledges that pressures of inflation and growth constrict loom most painfully over emerging markets and developing economies.

Moreover, this already subdued growth picture is stuffed with massive downside risks, the dominant and most severe risk being a prolonged and/or expanding Middle East war. More intense and longer war could slice between estimated 0.6 and 1.1 percentage points from 2026 growth and speed inflation up by 1 to 1.5 percentage points, the IMF says.

Other looming risks – worsening trade conflicts, increasing geopolitical fragmentation, and disappointing productivity gains from the global AI hype – are in line with consensus views of economists even as they are denied in political discourses. Future disruptions in an increasingly uncertain global environment need to be prepared for, the fund advises. In short, the ominous truth of uncertainty seems to settle in as operative geo-economic term.

In the words of unflappably enthusiastic IMF Executive Director Kristalina Georgieva at her curtain-raiser speech for the 2026 spring meeting, the assembled governments would have to focus on weathering the latest, war-induced shocks to the global economy and ease the pain of the people. She follows this up by warning the 191 IMF member countries to “get their house in good order, because when this shock [of the Iran war] dissipates, there will be another one to come”. 

Her cautious note of hope against the miasma of war, trade conflict and uncertainty calls for member countries’ cooperation. Despite all tensions and fragmentation, “there is so much potential in working together within regions, across the globe,” she enthuses. 

Shocks, aftershocks and ripples across the region

Across the vast Middle East – Central Asia territory (comprising 32 countries in the Middle East, North Africa, Pakistan, Afghanistan – MENAP – as well as the Caucasus and Central Asia, or CCA), the shock of the Iran war affected Arab countries, especially GCC economies, in vastly divergent ways. GCC member Qatar experienced the largest downward correction for the year, at 14.7 percentage points, whereas GCC peers Saudi Arabia and Oman saw their predictions contract by 1.4 and 0.5 percentage points.

On Lebanon, no comparable numerical impact estimation of the regional downturn is available. “For Lebanon, the ongoing war poses acute risks by intensifying pressures on trade, foreign reserves, and humanitarian conditions, for example, stemming from internally displaced people, while further heightening uncertainty”, is the single whole sentence dedicated to the country in the 22-page update.

In regional terms, the fog of uncertainty was so dense for so many weeks that the leading heads of the IMF’s Middle East and Central Asia department concede at the end of this year’s spring meeting that economic trajectories appear to be vacillating in deeply uncertain territory between the WEO’s “reference” and “adverse” scenarios.

The regional outlook by IMF estimates and projections is now 1.4 percent GDP growth in 2026, says Middle East and Central Asia department head Jihad Azour. According to Azour, this downward adjustment of 2.3 percentage points in the space of only a few months marks a record for such region-wide revisions.

Announcing gravely that “the shock is deep, broad and still unfolding” at time of the discussion with media on April 16, Azour and his deputy Roberto Cardarelli explain that their latest findings’ level of uncertainty is high and tilted towards downside risks. They also argue that non-energy scars left by the war’s disruptions in the regional economy could be bigger and more difficult to read than the scars inflicted on the energy sector.

What they can state with confidence in press briefing on the newly updated regional development report is the very uncomfortable observation that, in the words of Azour, the war outbreak on February 28 “disrupted three pillars of stability” that are vital for the regional and global economy – namely energy markets, trade routes, and business confidence.

A volatile geoeconomic outlook

 In sum, the IMF’s expectations for economic growth across the diverse and dichotomous region have been lowered by an astounding two thirds essentially because of the single, but massive, war shock – but even this downward revision is not a confirmed last word on the multi-actor confrontation’s economic fallout. The WEO overall reinforces widely shared expectations in the global mind-spheres are that the tremors will linger, perhaps even for years, and that the global impacts will be worse for the planet’s poorest nations.

The first expectation could become a self-fulfilling prophecy and the second is wholly unsurprising. But in any case, notwithstanding the apparent resilience of the capitalist system under pressures of wars and trade conflicts, the results of the Middle East war appear by May 2026 to be coalescing into a global recession that in opinion of many experts is rivaling the Great Recession of 2007-8.

But reliable analysis is nearly impossible to produce. There have simply been too many reversals or inconsistencies in the war actors’ initiatives and thus too many contradictory signals by respective commanders-in-chief. In the economic realm there is too little reliable data, too little time for reliable analyses, and far too much deliberate opacity.

Without all the needed data, the volatility of political minds and associated propaganda – predominantly in form of ethically uncommitted but vague statements with perfect deniability alongside some VERY BIG LIES – converges with the unpredictability of war and the overwhelming complexity of economic relationships into supply chain disturbances, economic uncertainty and market volatility. 

A recession risk is being built from two converging forces: runaway military spending and an AI bubble marked by massive infrastructure investment, workforce upheaval, and valuations not yet backed by real profits. On top of this, trade wars and populist governments redirecting money from social spending into arms races could deepen and spread any downturn, especially in an already fragmented global economy.

The social flip-side of the conflict coin

Ordinary people don’t live in stock markets or tax havens — and for them, the global community created a shared yardstick of progress. First launched at the UN around 2000 as the Millennium Development Goals, and renamed in 2015 the Sustainable Development Goals (SDGs), these frameworks measure how well societies are developing and whether everyday life is becoming more sustainable for the world’s majority.

The SDGs are targeting and measuring sustainability creation. Although the transmission of the SDGs happens largely via measurable economic vectors, the SDGs do not follow the swings of the markets or incorporate the paradigm of creative destructive.

Sustainable development, after generating several decades of encouraging signals, has been hit by a series of regressions. The heaviest impacts of the pandemic of 2020-21, the Ukraine conflict that rages since 2022, the Gaza war and Middle East conflicts of 2023-24, and the ongoing Iran crisis and regional violence can be seen through the SDG lens. And in terms of sustainable development, the impact of the Iran war is the next nail in the coffin of timely realization of SDGs.

This is made crystal clear by studies of the impact of the Iran crisis on first the Gaza strip and secondly African economies. In Palestine, the government’s central bureau of statistics (PCBS) established a directorate of records and statistical monitoring to surveil progress of SDG achievements.

A national review on the implementation of the 2030 SDG agenda was issued in preparation of Palestine’s participation in the UN’s high-level policy forum in 2018. While cautioning that the 2030 agenda slogan to leave no one behind “cannot be realized in a country that the whole world is leaving behind”, the paper reported modest national improvements for several SDGs in the years 2009 to 2017, disclosing that 109 of 244 SDG indicators were being, albeit imperfectly, monitored.

New reports on the situation of all SDGs in the first quarter of 2026 appear unavailable. Yet a 2025 UNDP assessment of Gazan food sustainability in the SDG envelope sees “growing evidence” that reaching the sustainability goals is difficult in circumstances that are “characterized by both unprecedented natural and human-made extraordinary challenges”.

According to the study, 15 SDGs in the social, environmental, and economic sustainability pillars have been damaged across Gaza in the conflicts that started in October of 2023, which contributed to destabilization of neighboring countries and their SDG processes. “The economic collapse in Gaza has far-reaching regional and global implications. Environmental degradation caused by the war, including pollution and soil contamination, does not respect borders and poses significant risks to neighboring regions,” the report elaborates. 

On the local SDG front, sustainability achievements have indeed been impeded. “In terms of SDG country positioning, Lebanon as of 2025 was ranked 134th over 167 countries, but I think that we today honestly rank [lower] than that,” Deenah Fakhoury, executive director of Global Compact Network Lebanon, tells Executive.

She explains that SDG impacts of the Iran conflict on Lebanon and the world are two different things. “If I talk globally, the UN is warning that the current war and systemic shock is reversing development gains. We are in reverse action in terms of poverty, we are in slowdown in terms of economic growth, and we have a widening gap in terms of equality,” she says and adds, “In Lebanon, conflict here is damaging the ecosystem, life on land and life under water, and infrastructure. It also is felt in the pillar addressing social cohesion and governance, which means SDGs 10 and 16. “

In evaluating the SDG dimension of Iran war, it must be remembered that the 2030 agenda was a third millennial milestone and focal point of education, promoted proudly by UNICEF as “the world’s largest lesson” to pupils and student cohorts in thousands of schools around the globe. According to the eponymous UNICEF programs home page, from 2015 8 million children in over 13 countries were made familiar with the 2030 SDG agenda each year.

But broken promises and deferred hopes notoriously destroy trust and can even literally sicken mind and body.  That unfortunate truth has especially been proven when the trust of young minds in their leaders was turned into disappointment over a fake promise or surreal societal goal.  

Young people — the first truly digital generation — are losing faith in global institutions that promised sustainability, democracy, and equality while delivering little. That loss of trust may be the decade’s biggest hidden economic cost: the slow collapse of the United Nations’ credibility and the democratic world order it represents.

Which leaves the central question: Is this just another rough economic cycle? A slow-motion disaster for poorer nations? Or could the collision of so many competing crises finally shake the global system hard enough that a genuinely more sustainable order — environmentally, socially, and economically — actually takes hold?

This analysis was written for a Spring 2026 Special Report on the repercussions of conflict on local economies

Lebanon is a country famously burdened by a culture of corruption, financial collapse, institutional paralysis, and years of imported conflict. But entering 2026, there were tentative signs of stabilization: a modest rebound in tourism, some renewed political momentum, and cautious hopes for a new virtuous cycle in the economy.

The escalation of war in April 2026 between Israel and Hezbollah interrupted this fragile recovery, shifting pressure again to the most immediate dimensions of economic life: energy supply, consumer prices, and environmental conditions. Economic pressures in Lebanon never unfold in isolation. But in the unfolding of two overlapping and interrelated conflicts, the first the was between the US/Israel and Iran, the second between Israel and Hezbollah, three intertwined core pillars of the economy were dislocated – energy, agriculture, and the environment.

Rising fuel costs increase transportation and operating expenses all along the supply chains. The badly insufficient electricity provision forces households and businesses to heavily rely on private generators which depend on imported, highly polluting fuel. Agricultural producers have to cope with a range of higher costs in conjunction with deliberate destruction of lands. Retail prices increase and inflation hits households from the working poor to a nominal middle class that is barely hanging on. Environmental consequences of two consecutive Lebanese wars waged from the air and on the ground are becoming more pronounced.

Lebanon has become adept, in a manner of speaking, at switching from a marginal peace economy with a high rate of informality to a war economy that survives by merit of informality and ingenuity. The result of the concurrent regional and cross-border wars at this time, however, is not simply a war economy in the abstract, but a spiral of daily deteriorating livelihoods. Economic, social, and environmental conditions are being degraded by a series of multi-source shocks, a chain disruption in which each shock reinforces the other.

Conflict is reshaping daily and future life  

Inflation in Lebanon cannot be explained by the current crisis and fuel prices alone. It reflects the interaction of domestic structural weaknesses, global inflationary pressures, and continuous uncertainty. Alissar Nasser, team leader of the Consumer Price Index at the Central Administration of Statistics (CAS), tells Executive that food prices had begun rising already before the regional escalation, driven in part by seasonal demand during Ramadan and Easter.

According to CAS, Lebanon’s Consumer Price Index increased by 6.9 percent between January and March 2026. The sharpest increase was recorded in transportation, which rose by 21.6 percent, reflecting the direct effect of higher fuel costs. Prices for water, electricity, gas, and other fuels increased by 17.6 percent. The index for food and non-alcoholic beverages rose by 8.4 percent. Within food categories, the lowest inflation of 5.1 percent was recorded for bread and cereals, but meat, vegetable, and fruit prices increased by margins of almost 14 to over 16 percent.

Agricultural land under fire

These economic and social pressures are being intensified by conflict damage to the agricultural sector. Southern Lebanon, one of the country’s most important farming regions, has experienced extensive fires, soil degradation, and direct damage to farmland, greenhouses, and irrigation systems. According to the Ministry of Agriculture’s weekly report released on March 27^th, 22 percent of the country’s agricultural land has been affected by the bombing, though the report did not specify whether this includes damages accrued since October 2023 or during the current escalation since March 2026. 

Both environmental experts interviewed for this article stress that the March 2026 escalation did not create a new environmental crisis; it added to existing environmental degradation. “We barely got out of the [last] war,” says Christina Abi Haidar, a lawyer who is specialized on energy and governance. “We did not recover, and the March escalation increased the burden.”

Beyond agricultural losses, the new war forces the transformation of entire communities. In places such as Bint Jbeil, Abi Haidar says, “you cannot recognize the village at all.” She explains that some areas in South Lebanon have been damaged to the point that familiar landmarks in several municipalities are no longer recognizable.

For farmers, the consequences are both immediate and long term. In addition to direct damage, many were unable to access their land to harvest crops. Olive growers in particular, lost an important production season. Nadim Farajallah, chief sustainability officer at the Lebanese American University, explains that in orchards the loss extends well beyond one year. “It takes four to five years for a tree to resume its production,” he says.

The use of white phosphorus, documented extensively by human rights and aid groups, experts, and international media, has heightened concern about long-term contamination. Farajallah offers an important distinction: “White phosphorus is not an issue in the soil. It is an issue of burning.” In other words, the main damage comes from the immediate destruction of crops, trees, and vegetation rather than persistent soil toxicity.

The economic implications extend beyond agriculture itself. Damage to agricultural land reduces domestic production, increasing Lebanon’s reliance on imports at a time when shipping, insurance, and transportation costs are also rising, according to the World Bank’s 2026 Lebanon Overview. Lebanon’s Central Administration for Statistics (CAS) recorded a 14.19 percent annual inflation, a 24.81 percent jump in transportation costs and a 20 percent rise in energy costs in March 2026. The result is a reinforcing cycle: environmental damage lowers local output, greater dependence on imports raises costs, and higher prices squeeze both households and farmers. With fewer resources to replant, repair infrastructure, or replace lost assets, the capacity to recover becomes increasingly constrained.

In much wider damage impacts, bombing can destroy wells, pumps, reservoirs, and irrigation pipes, preventing cultivation even after the fighting ends. Greenhouses may need to be rebuilt entirely. Livestock and poultry operations are also highly vulnerable. Dairy cows must be milked daily, and poultry are sensitive to stress. “We only think of crops and trees,” Farajallah says. “But we also have dairy production, meat production, and poultry production.”

Water infrastructure and systemic vulnerability

Water systems are among the most structurally fragile components of Lebanon’s economy, and the current conflict has exposed the extent of that vulnerability. Even before the 2026 escalation, the sector was under strain from decades of underinvestment, weak governance, and the financial collapse.

Farajalla notes that the 2019 economic crisis severely weakened the water sector by cutting the value of revenues and reducing the ability of utilities to cover operating costs. “We had to rely on donors just to keep the sector afloat, barely functional,” he says.

The recent conflict has added direct physical damage to an already weakened system. Oxfam International reports that at least seven critical water facilities, including reservoirs, pumping stations, and distribution networks, were damaged in the early days of the escalation in 2026.

Additionally, the significance of this damage lies in the close link between water and energy. Water systems depend heavily on electricity and fuel to operate pumps and treatment facilities. As a result, disruptions to energy supply can interrupt water access even when infrastructure remains physically intact.

Abi Haidar notes that many solar-powered pumping systems installed in recent years were also damaged, particularly in southern Lebanon. These systems had helped municipalities and farmers reduce dependence on diesel generators. For businesses, especially in agriculture, food processing, and small-scale manufacturing, water insecurity directly affects productivity and cost.

Debris, pollution, and long-term health risks

The accumulation of debris and hazardous waste is another major consequence of the conflict for natural environments and human habitats. Airstrikes and widespread destruction generate large amounts of rubble, including broken concrete, metal, dust, and other materials that must be safely managed.

Farajallah emphasizes that Lebanon is still struggling to manage debris from previous crises. Rubble from the 2020 Beirut port explosion remains stored near Electricité du Liban, underscoring the country’s limited capacity to process large volumes of waste. “The problem of the debris is the immense amount of volume that we have,” he says.

The disruption of waste collection adds another layer of strain. As displaced populations move into host communities, the volume of waste can exceed the capacity of municipal contractors, leading to garbage accumulating in public spaces. At the same time, dust generated by damaged buildings and debris can worsen air quality, increasing health risks, particularly for children and older people.

Abi Haidar warns that these environmental effects may have lasting consequences for public health. Lebanon already faces elevated rates of pollution-related illnesses, including respiratory diseases and certain cancers linked to poor air quality, waste mismanagement, and environmental contamination. Additional pollution from debris, damaged infrastructure, and contamination of soil, water, and air could further increase these risks over time. Even after the fighting ends, the health impacts may persist for years, creating a less visible but potentially significant burden on the country’s recovery.

The fiscal cost of energy disruption

The conflict has also exposed other layers of Lebanon’s energy vulnerability. Abi Haidar distinguishes between other layers of losses.

The first is direct physical damage to substations, transformers, transmission lines, and distribution networks. The World Bank estimated that energy sector damage from the previous war reached approximately 200 million U.S. dollars. Because reconstruction has been limited and some facilities that were repaired have since been damaged again, current losses are likely to be substantially higher.

The second is indirect domestic losses, particularly unpaid electricity bills from households that were displaced or can no longer afford to pay. Abi Haidar estimates that unpaid bills linked to the conflict may have reached between 42 million and 45 million U.S. dollars.

“Lebanon had a bouquet of everything,” Abi Haidar says. The country is absorbing the direct costs of bombing, including the destruction of infrastructure and productive assets, while simultaneously facing the inflationary effects of higher global energy prices.

Who bears the cost?

In legal terms, both experts are clear: responsibility rests with the party causing the damage. In practice, however, compensation remains uncertain, and the economic burden is largely absorbed within Lebanon itself.

“Farmers have been bearing the cost,” says Farajallah. For agricultural producers, losses include destroyed crops, damaged orchards, irrigation systems, and farm infrastructure, as well as years of lost income while productive assets recover. Consumers bear the cost as well through higher food, water, and energy prices. Public institutions face rising reconstruction needs at a time when state resources remain severely constrained.

Reconstruction is likely to depend on a combination of donor financing, public borrowing, and private losses, shifting much of the burden to households and future generations.

Both experts emphasize that systematic documentation is essential. Lebanon should quantify agricultural, environmental, and infrastructure losses and formally pursue reparations. Damage to farmland, water systems, electricity infrastructure, and public health should be documented and submitted through international channels, including the United Nations.

Yet this process remains inadequate. Despite repeated cycles of conflict, Lebanon has not consistently documented losses into effective international claims or compensation. Without rigorous documentation and sustained legal follow-up, environmental and economic losses risk becoming another unrecorded cost of conflict, absorbed domestically and financed through debt, aid, and reduced living standards.

A structural dimension of the crisis

The surge in global oil prices is one of the clearest channels through which the regional conflict is affecting Lebanon. In an economy that depends almost entirely on imported fuel, higher oil prices quickly translate into higher transportation costs, more expensive electricity generation, and rising prices for food and other essential goods. According to CAS data from March 2026, transportation prices rose 25 percent year-on-year in March 2026, while housing, water, electricity, gas and other fuels — the largest category in the CPI basket — rose 20 percent over the same period. This pass-through was direct: fuel accounts for roughly 82 percent of private diesel-generation costs in Lebanon, and the official generator tariff jumped from USD 0.34/kWh in February 2026 to USD 0.45/kWh in March 2026 as diesel prices spiked according to an April 2026 report by Arab Reform Initiative.

These effects are amplified by direct damage to agricultural land, water facilities, and energy infrastructure. Lower domestic production increases reliance on imports, while damaged public services raise operating costs for households, farmers, and businesses.

The burden of these shocks is largely absorbed within Lebanon. Farmers lose productive assets that may take years to restore. Public institutions face growing reconstruction needs with limited resources. Households confront higher costs for food, electricity, water, and transportation, while health risks associated with pollution and environmental contamination may persist long after the fighting ends.

Sustained, or lasting, economic peace is the precondition for Lebanese social salvation. This is a simple truth that one can call self-evident in the face of our global neighborhood’s long ongoing perma-conflict. It is confirmed, once again this June 5, by the United Nations’ assessment of Lebanon’s urgent survival needs to be funded with $331.5 million for the ongoing three-month period. This added request raises the total UN 2026 flash appeal for the most urgent country support to $639.9 million between March and August of this year.

Moreover, the timeless truth about the need to avoid the multi-dimensional human disaster of war has been locally reinforced in 2026, as it has before in 2024 and 2006 (and before and before…). The lesson of three wars is thus being transcribed into a solid knowledge that peace for the small state of Lebanon is indispensable for national development under all traditional and contemporary perspectives of sovereignty.

A sustainable economy, an economy that does repeat wild swings between growth in year one and recession in years two to five, an economy that capitalizes on autochthon creativity and globally integrated productivity, an economy that achieves global benchmarks for balancing national accounts in trade and payments, an economy that preserves its natural, human and social assets, that can grow without entering dependence-inducing monetary programs and can sustain the population without requiring recurrent external food aid due to social emergencies – is a viable goal for Lebanon. But only in a time of peace.

Before even beginning to talk about foundations for practical peace in Lebanon, however, one has to acknowledge that economic peace is nothing if not a difficult proposition. Sustainable economic peace in the 21^st century in general and in the Middle East in particular is not an easy sell, from two contrarian angles.

One angle is that the principle of peace presents itself as a vision and ideal rather than a lasting societal foundation throughout the historic reality of peace building. From this angle, one simply has to recognize that complete long-lasting peace is not a result of perfect contracts among enlightened sovereign republics. It is a visionary ideal worth striving for, but it is not achievable on basis of one nation’s sovereignty, however strong that nation may be. It is an imagined political reality for which there is not even a fleeting precedent in the Lebanese context.

The second, equally weighty but almost impossibly complex angle to the conundrum of practical peace is based on a threefold economic-political observation. First, zero-sum approaches to economic competition, including those with military implications, aren’t always economically inferior than cooperative, mutually beneficial ones; the assumption that win-win is always superior doesn’t hold up. Second, we now understand just how vast and interlinked the potential gains and losses are across environmental, social, economic, and civilizational domains, which means a major war in the 21st century could produce outcomes that are genuinely unpredictable and threaten humanity’s existence as a whole. Third, agreements to avoid military conflict and political hostility are no longer enough to guarantee that individual nations can sustain their economies or maintain economic self-determination, and this gap may be even wider in today’s digital age than it was in earlier eras.

Practical peace in the digital age will have to be forged by the global and economically interconnected community of nations on basis of understanding that war, irrespective of any preliminary bottom line with a win-lose zero sum outcome, is in the long run a lose-lose game with 1000 percent predictability.

Whereas this latter insight in the politico-economic interplay of war and peace has not been at the center of global attention in the post-Cold War era, it is harshly brought to the fore or our attention by the conflicts blasting over the Middle East region in this year of 2026. In support of this view, whereas matters of war and peace evidently have upsides as well as downsides under an politico-economic focus, the international energy markets in this spring and summer make for a most convincing argument that decisions of war and aggression have unexpected and detrimental global impacts on nearly all national economies. 

By the way, the example of crude oil is just a highly visible real economy one in a number of escalating arguments against the fragmentation of the economic world. Another tangible politico-economic lesson of the Iran war of 2026 is the complexity that intertwines the opportunity costs of war and the paucity of peace dividends. The expansion of the financialized meta-economies of global trade in the past four decades has ballooned global financial flows but it has also radically increased systemic fragilities, need for costly oversight, and risks tied to fragmentation. According to a June 2026 research paper under the World Economic Forum’s initiative for Navigating Global Financial System Fragmentation, for example, the risk of systemic financial fragmentation including tariffs and trade conflicts, is, in a worst-case projection, as high as $6.9 trillion, more than 6 percent of global GDP.

Middle Eastern history of the late 20^th and early 21^st century thus is more than just a strict, relentless moral teacher that peace is a vision to strive for. It shows the world that economic peace is the indispensable foundation for a state of sustainable sovereignty. Executive Magazine coincidentally regards this “practical peace” as a foundation to a sovereign Lebanese state.

The trap of self-divide

One can call the primary obstacle to nation-level implementation of practical peace in Lebanon the “Lebanon trap”. In part, this term attempts to codify the centuries old reality that the Lebanese polity has been a sideline event in geopolitics but also an attractive morsel for expansionist empires. Colonizers, conquerors and neo-colonial powers have used the military-political coastal “highway” of the eastern Mediterranean territory and sat at the local decision-making tables either directly or by proxy.

Existing within the confines of a very limiting territorial enclosure has been the fate of many small polities living in not-easy-to-defend lands. But in Lebanon, this fragmentation into small communities has been made worse by a lack of shared purpose among its culturally and economically diverse communities. This diversity is potentially a great strength, but historically it instead created a deeper, almost inescapable dimension to the constraints of this small polity, the Lebanon trap.

Throughout a millennia-spanning history, this trap has been sprung repeatedly by conquerors and invading empires as well as local lords that used a “divide and rule” strategy. Furthermore, many a power usurper also benefited from local “self-divide and be ruled” competition among communities. Examining the contemporary Lebanese mentality of the 21^st century, it serves to remember that every Lebanese self-identified as coming from a plethora of faith-based communities long before its current politico-economic, openly or covertly arms bearing, sectarian organizations were established at different points during the past 100 years. 

This historic fragmentation and diversity is the cultural baseline of Lebanon. It is both a restraint and a tremendous opportunity. However, this opportunity can be turned into the Lebanon trap in three ways: when the country’s diverse communities remain vulnerable to corruption; the polity repeatedly defers to foreign empires and modern quasi-empires when making national decisions; and local communities tend to avoid taking responsibility for their own conduct, which should be the foundation of sovereignty. The result is a mentality of open subservience to external powers, combined with shameless finger-pointing between communities.  

Clutching at sovereign straws

The regional case thus is indeed the master class material for investigating the flaws of two of the 20^th century’s highly popular thought experiments in the construction of practical peace – political pacifism and economic peace dividends. The enabling environment for this master class is the wide presence of diverse religions and ideologies that have been competing for allegiance of polities and societies around the region. On the levels of tribe-like societies, nation-states and would-be hegemons, the region has been witnessing active competitors for popular adherence to identity systems that have historically ranged from dedicated Islamism and convinced Zionism to dynastic rule, capitalist laissez faire, socialist utopias, agnostic totalitarianism and lately to social media anarchy.

Political pacifism and economic peace are not materializing in the most developed societies and also have not shown systemic impact in least-developed countries that struggle for baseline survival.  In the Arab regional context, however, to cite Lebanese economic thinker and author Nassim Taleb, “the Levant has been a mass producer of consequential events nobody saw coming”.

In a deeper dive into the enigma of Lebanese mentality, it seems prudent to recall scientific research on development of mindsets from perspectives of memory, cognitive selection, and reason.  A century of research into reconstructive and constructive memory has convinced most people that memories are not unchangeable recordings of facts. Similarly, cognitive dissonance has been called out in the middle of the last century as coping mechanism for solving intractable contradictions by way of mental dismissal. The very faculty of human reason finally has been noted earlier in the current century for its social (and social capital) utility, meaning the ability to use reasoning for constructing arguments after the fact and winning social acceptance (which in the view of Taleb also is a core component of a “black swan” incident).

This transactional aspect of reason, according to an investigation into “The Enigma of Reason” supersedes the intellectual functionality of reason as instrument of truth detection or improved decision making (to the delight of politicians and journalists). In the context of behavioral economics, as in wider behavioral studies, debates over memories, reason, and a wide range of cognitive processes and biases have taken on the mantle of self-evident truths. Understanding these truths can elucidate the Lebanese cognitive dichotomy and darkness of mentalities shaped by trauma after trauma and influenced by fake narrative after fake narrative as apparently is the case in the Lebanese mind-sphere after centuries of precarious, non-sovereign reality which by way of evolutionary constructs have produced contemporary Lebanese mentalities as tools of survival and social integration.

Peace is a vision that has not been invalidated by historic shocks of the last century – from the horror of “never again” to the evil of weapons of mass destruction. But perfect peace has never been achieved, not even with all the skills, tech, and knowledge accumulations of the 20^th century. The most rational approach should nonetheless be that practical peace is a worthy and attainable state of existence but also that under regional realities during the first quarter of the 21^st century, economic peace and economic democracy is not yet a realistically attainable platform of existence for the conflict-prone and predator-producing species homo [non] sapiens.

In juxtaposition to such pessimism, however, the scope of economic peace and economic democracy is being reshaped and possibly increasing. The issue is controlling the territory, the metaverse, and the narrative in the digital world within a multi-trillion dollar global economy whose two ideologically, culturally, and socially juxtaposed largest players USA and China control half of total productivity and where trillion-dollar wars are becoming the rule of armed conflict.

For the Islamic world and wider Middle East region, the new scope of war and peace risks in a digitized political and economic environment comes at a time when conflict risk has been reaffirmed as high and when the Iranian model has confirmed its readiness to operate as a determined and unrestrained conflict actor when under threat. It furthermore comes during an inflection period for Arab economies. Oil-exporting autocratic economies in the Gulf are making efforts to recast themselves into new roles as transportation, tourism, trade, and services hubs, partially with advanced AI adoption efforts and entrepreneurship aspirations.

These factors contribute to regional power shifts and new risks of imbalance that are made all the weightier in Lebanon by the fact that Israel is today not just a developed economy in the high income bracket of advanced capitalism with massive technological and military exports. Israel in 2026 stands as a regional hegemonic player with an expansionary ideological-politico-economic game plan. Perhaps the clearest illustrations of the changed position of Israel can be found in the increasing Israeli weapons exports in recent years and two new attempts of Israeli lobbying in the USA to become a strategic partner in mission-critical military tech infrastructures.  

Under these circumstances, backward comparisons and memories of past near-reconciliation between Lebanon and any neighbor or regional power are not helpful. New and competing power cores with regional conflict potential have been emerging in Israel, Iran, and the GCC. When compared to the increased power interests and potentials for economic competition of these countries, the already much less significant political and economic potential of Lebanon seems to be at a multi-decade low point. As proven for a repeated time by the war of March 2026, the country is suffering from impotence to defend its territory and is moreover exposed to territorial intrusions, or what critics of Israel call unchecked “Gazafication”.

To sum up the anatomy lesson of the Lebanon trap, its material baseline is the state’s combination of small territory, inferior political power, and minimal military capability with the country’s attractiveness to would-be conquerors. The trap is a combination of the centuries-long experience of extreme vulnerability to external pressures, including foreign sponsors of the economy, with readiness of an internally dichotomous polity to ostracize groups instead of constructing pathways of integration.

There is no evidence that sovereignty has ever protected Lebanon and powered this state to the point of being an equal contender relative to neighboring countries, nor is there evidence of a valid concept of national sovereignty as secret base for Lebanese success in the future. There is moreover no political, military or economic leverage that Beirut can bring to bear in this situation. But there is a path forward: by reshaping the mentality and mindset at the heart of the Lebanon trap, the country can begin to change its own trajectory.