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Sunday 01 Mar 2026
LOCAL EDITION
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LOCAL EDITION
The escalation of tensions to the point of a U.S. strike on Iran did not occur overnight; it should not come as a surprise. From late last year until the first missile was launched, there were numerous warning signs.
These included large-scale internal protests sparked by Iran's economic downturn, the Iranian government's subsequent crackdown on demonstrators, and warnings from U.S. President Donald Trump to cease such actions. Furthermore, last month saw the deployment of major U.S. warships, bombers, and missile boats to the region. Meanwhile, diplomatic efforts mediated by Oman in Geneva regarding Iran's nuclear program concluded without significant progress. The missile strike followed just two days later.
This sequence of events unfolded over approximately the last 60 days. During this time, international think tanks were analyzing various scenarios where tensions between the two nations could escalate into direct conflict, studying the potential outcomes of such a situation. Consequently, there is no denying that the Maldivian economy, which is heavily reliant on global tourism, stands in the shadow of these darkening clouds. The country has a Foreign Ministry. It has a Tourism Ministry. Surely, these institutions will be vigilant of global developments. The storm has now arrived; the question is, how significant will this shock be for the Maldives, and is the country prepared?
"Three key sectors at risk, tourism faces greatest threat"
The reality of the past 50 years is that the primary driver of the Maldivian way of life is its premier position in the global tourism industry. The spending of billionaires, millionaires, and travelers of all levels from the Middle East, Europe, the Americas, and Asia is the lifeblood of the Maldivian economy. Whether it is a global pandemic or a breaking war, international travel is often the first sector to be impacted. If travel routes are obstructed, the entire chain is broken. Without tourists, other economic activities cannot thrive.
Mohamed Firaq, an expert in airline operations and tourism, noted that a long-standing issue for Maldivian tourism is the lack of "market balance." This refers to over-reliance on specific regions rather than having a diverse global influx of visitors.
Firaq highlighted that Europe remains the largest market for the Maldives. However, more than 55 percent of European tourists transit through Middle Eastern hubs before reaching the Maldives.
"Therefore, any issues in that region will directly impact us," Firaq stated.
As Middle Eastern tensions rise, Qatar's airspace faces restrictions, and major airports in the UAE, including in Dubai, have experienced temporary service disruptions. Flights by major carriers like Qatar Airways and Emirates have faced delays and cancellations. The immediate result is thousands of tourists unable to reach the Maldives, leading to cancelled bookings. If this situation persists, the long-term consequences could be severe.
"It will be a very challenging period if this is prolonged," Firaq warned.
Former Economic Minister Ahmed Mohamed (Andey) believes that if the Middle East conflict continues, three main sectors are at risk: tourism, fuel imports, and foreign exchange stability.
He echoed Firaq’s concerns, noting that the disruption of Middle Eastern transit hubs directly reduces tourist arrivals. Furthermore, as a country that imports all its fuel and essential goods, the Maldives faces the risk of rising global energy prices leading to higher inflation.
What do global economic experts say?
Global economists suggest that the negative economic impact of the current conflict will depend largely on its duration.
William Jackson, Chief Emerging Markets Economist at Capital Economics, stated that the impact hinges on the scale of Iranian retaliation and changes in the oil market.
“A limited set of strikes could plausibly send oil towards $80 per barrel, while a longer conflict that causes disruptions to supply could send prices much higher – with a material effect on global inflation,” Jackson noted.
Reports indicate no immediate signs of the hostilities ceasing.
“Iranian retaliation is likely to weigh on Israel’s economy. The 12-day war with Iran in June last year resulted in a fall in GDP of 1.1 per cent quarter-on-quarter in Q2. Elsewhere in the Middle East, there may be disruptions to activity arising from the threat of an Iranian attack on US military bases in the region (e.g. in Bahrain and Qatar) and from airspace closures,” he added.
Regarding the global economy, Jackson emphasized that oil market volatility is the primary concern.
“Our estimates suggest that the political risk premium baked into the oil price has already risen substantially amid the US military build-up in the region. That said, even if strikes remain limited, we think Brent crude oil prices might rise to about $80 a barrel (around their peak during the 12-day war), from $73 a barrel on Friday. But oil prices would rise much further if the conflict is prolonged and, in particular, if it affects actual oil supply – due to disruptions to Iranian supply or to Iranian attempts to block the Strait of Hormuz. That could cause oil prices to jump, perhaps to around $100 a barrel,” he said.
What measures should the government take?
The risks are clear, as are the necessary steps. The government has indicated it is identifying key issues and planning to mitigate potential problems. Some of these measures include:
The Finance Ministry has provided assurances that current reserves are sufficient to withstand economic shocks and sustain imports.
"Preparation does not mean complete immunity from fragile situations, but it strengthens resilience to overcome them. The degree to which open, small economies can mitigate external shocks depends on the systemic strength of institutions and economic discipline," said former Minister Ahmed, one of the country's leading economic experts.
The storm is already here. The question remains whether the current safeguards are strong enough to provide shelter from the wind and rain it unleashes, and for how long.
Both international and local experts agree that a prolonged Middle East conflict will weaken the global economy. Amidst these global shifts, the responsibility lies with the government to steer the Maldivian economy away from a more precarious state.
Ultimately, two major questions remain: How long will the Middle East unrest last? And how much impact can the Maldives truly withstand? The answers will become clearer in the days ahead.
