Conflict vs. Growth: Political Threats to a Bullish Region

The Middle East looks like a paradox: On the one hand the high oil prices boost the regional economies, financiers are running out of investment projects, Gulf stock markets are recovering from the 2006 slump and one of the last “closed economies,” Syria, is opening. However, all this economic development occurs in the shadow of a whole number of political Damocles’ swords. External threats – an American war with Iran, which would affect the Gulf, and an Israeli-Syrian conflict that could draw in Lebanon — and domestic quandaries — ranging from out-of-control population growth to sluggish bureaucracies and the Islamist challenges to ruling elites — could all spoil the current growth. The twin forces of oil money and attractive economic policies have boosted the region’s economic outlook and general confidence. Mega-scale infrastructure, tourism, and real-estate projects — like the Abdallah Economic City near Jeddah and the Dubai Metro — are