How the volatile politics and military conflicts in 2025 have impacted HR, accounting, and broader economic dynamics across the Middle East and GCC

Regional Overview: Economic Shockwaves & HR Disruption

The Middle East and GCC economies have shown notable resilience, but ongoing conflicts—particularly between Iran, Israel, Gaza, and Houthi-backed disruptions in the Red Sea—have deeply affected workforce dynamics, talent management, and financial operations.

GDP & Growth Trends

The World Bank projects GCC growth of around 3.2% in 2025 and 4–4.5% for 2026‑27, driven mainly by non‑oil sectors—signaling effective diversification amidst turbulence .

In contrast, conflict‑exposed nations endure downturns: Lebanon’s GDP fell ~6.6% in 2024, erasing over 38% since 2019 ; Jordan saw tourist arrivals drop by 6.6% in early 2024 due to regional instability .

Labor Markets & Employment

Saudi Arabia hit record low unemployment—2.8% in Q1 2025, with labor-force participation at 68.2%, driven by Vision 2030 policies . But youth unemployment across MENA remains alarmingly high—25%+, peaking at ~40% in Morocco .

Gaza endured catastrophic labor collapse: 61% drop in employment, West Bank 24%, with unemployment soaring to 57%, losing ~500,000 jobs in Q1 2024 .

In Israel, mobilization of 300,000 reservists led to Q4 2023 output falling 20%, private consumption down 27%, business investment plummeting *67.8%* .

HR and Talent Management Amid Crisis

Workforce Confidence & Shifting Demands

A PwC CEO Survey finds 64% of GCC CEOs plan to increase headcount despite skills shortages (34%) and geopolitical risk (41%) —a choice reflecting cautious optimism amid turbulence.

However, regional HR strategies are evolving: 43% of GCC firms are diversifying supply chains, with 23% reshoring to boost resilience .

Firms are increasingly proactive in upskilling programs: 46% of Middle East employers expect talent availability to improve by 2030, but two-thirds warn about persistent skills gaps .

Employee Response & Reskilling

A 2024 UAE survey found 65% of workers plan career changes, driven by automation and desire for flexibility; HR is investing more in training and remote-work policies .

In Saudi Arabia and the UAE, HR teams are shifting recruitment priorities—focusing less on formal degrees and more on practical, digital, cybersecurity, and AI skills.

Accounting & Finance: From Oil Revenues to Risk Management

Oil Price Volatility & Budget Stress

Brent crude spiked from ~$70 to $78/bbl in June after U.S.–Iran incidents, triggering insurance and freight premiums hike, though prices later eased .

JPMorgan cautions prolonged Strait of Hormuz risks could spike oil to $110–130/bbl, pressuring inflation and budgets .

IMF projects GCC current-account surplus to decline from 6.1% of GDP in 2024 to approximately 2.5%, reflecting weaker hydrocarbon revenues .

Budget Adjustments & Diversification Spending

Saudi Arabia recorded 2.8% Q1 unemployment, supporting Vision 2030 reform funding .

GCC non‑oil growth (~3.7%) underpins ongoing infrastructure and digital investments .

Conversely, Lebanon and Gaza are facing deep fiscal crises: Lebanon saw $20 billion in war-related losses, rising inflation, collapsing healthcare and education systems ; Gaza suffers from 300% inflation and decimated banking infrastructure .

Accounting & Compliance Challenges

High volatility pushes accountants toward frequent forecast revisions, currency hedging procedures, and scenario-based risk disclosures.

In conflict zones, operational disruptions (e.g. rolling blackouts in Iran) have slashed industrial output by up to 50%, costing ~$20 billion—forcing reclassification of assets, impairment reviews, and revisiting energy contingencies .

Companies are adapting procurement policies: GCC firms now emphasize multi-sourcing, local suppliers, and supply‑chain risk KPIs—with 44% citing high inflation as top trade risk .

Strategic Implications for HR & Accounting Professionals

For HR Leaders:

Pivot recruiting toward resilience: Recruit cross-sector skills—cybersecurity, AI, logistics—that buffer against geopolitical shocks.

Anchor retention in flexibility: Offer remote, hybrid work, upskilling, and contract options to retain talent amid uncertainty.

Focus on well‑being: Provide mental‑health support, especially for staff impacted by regional instability or displacement.

For Accounting Teams:

Ramp up scenario forecasting: Embed multiple volatility scenarios (oil prices, sanctions, supply shocks) into budgets.

Implement dynamic costing models: Introduce real-time cost-tracking systems for logistics, energy, and security spend.

Enhance compliance and disclosures: Strengthen audit readiness around risk reporting, impairment testing, and financial stress assessment.

Conclusion

In 2025, Middle Eastern economies are navigating complex crosswinds: geopolitical conflict, inflation, and energy market volatility. While the GCC remains relatively robust—growing at ~3.2% and expanding non‑oil employment—conflict‑exposed economies like Lebanon, Gaza, Iran, and Egypt are suffering mass job losses, infrastructure damage, and current‑account strain.

For HR and accounting professionals, this demands agility: reworking recruitment strategies, reforecasting budgets, and embedding resilience in compensation, benefits, and financial reporting. Organizations that actively upskill their workforce, diversify supply lines, and implement dynamic accounting practices will be better positioned to thrive amidst uncertainty.