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OIC Economies
Iran’s fragile state could trigger a change in government 

Iran is facing pressing economic and social challenges, exhibiting signs of state failure, according to analysts.

The country’s existing problems were exacerbated by the recent military clash with Israel. 

“The conflict imposed significant economic costs on Iran, estimated between $24-35 billion, or 6.3-9.2% of its GDP,” Khalid Al Terkawi, economic consultant at Jusoor Studies Centre told Salaam Gateway. 

“It exacerbated existing challenges like sanctions, mismanagement, and chronic shortages. This led to currency devaluation, severe trade deficits, and high inflation. Essential goods shortages and worsening power outages also occurred.” 

A 12-day conflict erupted on June 13, after Israel launched air strikes on Iranian miliary and nuclear sites, targeting its top military brass and several nuclear scientists as well as prompting Iranian military retaliation.

The US entered the clash on June 22, attacked Iran’s nuclear facilities, and later brokered a ceasefire after Iran attacked its airbase in Qatar. 

Iran was already contesting with grave economic challenges prior to its military showdown with Israel. The International Monetary Fund projects Iran’s economy to grow by a non-descript 0.3 per cent in 2025, downgraded from the fund’s last October forecast of 3.1 percent. It is expected to grow 1.1 per cent next year, the fund said in May.

Inflation is expected to soar from 32.6 percent last year, to 43.3 percent in 2025, before easing slightly to 42.5 percent next year, the IMF said in April. 

Kristalina Georgieva, the fund’s managing director told Bloomberg TV this month that the US attacks on Iran were another source of uncertainty in an already highly uncertain environment. 

Iranian rial plummeted with its free-market exchange rate at about 95,700 rials to a dollar at 4am Iran time on June 13, according to Bonbast.com. 

Tehran’s stock exchange reopened on June 28 after a nine-day closure, with more than 99% listed companies trading in red on the first day. The main index reportedly fell by 62,503 points, closing at 2,922,101. 

A state collapse can trigger a change in government, as the state loses its ability to perform, says Al Terkawi. 

“Mechanisms include the emergence of new independent states, replacement of the existing government, or internal conflicts. Iran exhibits high state fragility, with its 2024 Fragile States Index score is 82.90. Following the conflict, the regime intensified internal security crackdowns, including mass arrests and executions, to suppress dissent.” 

The conflict also delivered a "severe blow" to the West Asia tourism sector, leading to widespread flight cancellations and a sharp decline in international arrivals to Iran, he added. 

The country welcomed 7.4 million foreign tourists in the 12 months, starting March 21, 2024, with the aim to increase the figure to 15 million within the next four years. The recent clash may dent Iran's tourism plans, at least in the short-term. 

An unexpected change in internal Iranian politics could also dramatically alter the country's foreign policy equation and reset the gameplan for foreign intervention.

"Does something happen to the Iranian regime that would be a game changer?” asked Jon Finer, distinguished fellow at the Columbia Center on Global Energy Policy in a June 26 webinar. "A coup of some kind, a collapse of some kind, a popular uprising?”  

OIC Economies
OIC roundup: Oman, Uzbekistan ink deals to expand air links, trade

Here's a roundup of key developments across the OIC ecosystem during June

 

Editor's note: Its partnership season across the OIC canvas, with Oman looking to strengthen cooperation with Uzbekistan and Algeria. 

 

Then, there's Malaysia seeking to extend ties with Guinea-Bissau with key Islamic economy sectors at the centre. Qatar and Pakistan are exploring economic cooperation, too. 

 

Trade Developments


Malaysia / Guinea-Bissau

M'sia, Guinea-Bissau extend ties with focus on Islamic economy sectors

Malaysia and Guinea-Bissau have reaffirmed their commitment to strengthening bilateral relations, focusing on key sectors such as the halal industry, Islamic finance, energy, and capacity building.

 

Prime Minister Anwar Ibrahim encouraged Malaysian corporations, including PETRONAS and FGV Holdings, to explore opportunities in Guinea-Bissau and use it as a base to expand into Africa and beyond. (The Star)

 

Oman / Uzbekistan

Oman, Uzbekistan ink deals to expand air links, trade

Oman and Uzbekistan have signed agreements to expand air transport rights and strengthen logistical cooperation, with the goal of boosting trade and investment ties between the two nations.

 

The agreements were made during the fifth session of the Omani-Uzbek Joint Committee in Tashkent.

 

The accords include increasing operating rights for airlines, supporting the re-export of Uzbek products through Omani ports, and enhancing cooperation in scientific research and innovation. (Zawya)

 

Qatar / Pakistan

Qatar, Pakistan explore economic cooperation

Qatar Chamber General Manager Ali Boushraibek Al Mansouri hosted a delegation from the Sialkot Chamber of Commerce and Industry in Pakistan, led by President Ikram ul Haq.

 

The meeting focused on enhancing trade and economic cooperation between Qatar and Pakistan, as well as strengthening institutional collaboration between the two chambers to support private sector engagement and increase bilateral trade and investment. (The Peninsula)

 

Oman / Algeria

Oman and Algeria explore ways to strengthen economic links

The Minister of Commerce, Industry, and Investment Promotion for Oman, held meetings with several Algerian Ministers and senior officials to discuss ways to enhance economic, trade, and investment cooperation between Oman and Algeria. (Foreign Ministry of Oman)

 

UAE / Uzbekistan

Dubai Chambers hosts Dubai-Uzbekistan Business Seminar

Dubai Chambers hosted a high-level delegation from Uzbekistan, led by Laziz Kudratov, Minister of Investment, Industry, and Trade of Uzbekistan, at the Dubai-Uzbekistan Business Seminar.

 

The event, attended by around 100 businessmen, aimed to strengthen economic cooperation and explore opportunities to increase bilateral trade and investments. (Zawya)

 

Investment


Mauritania

Mauritania raises $2bn pledge from Arab Coordination Group 

Mauritania's national development program received a significant boost with a $2 billion pledge from the Arab Coordination Group during a high-level roundtable in Vienna, Austria.

 

The event, chaired by Mauritania's President Mohamed Ould Cheikh El Ghazouani, was hosted by the OPEC Fund for International Development. 

 

OPEC Fund President Abdulhamid Alkhalifa emphasized the group’s commitment to supporting Mauritania’s development, mobilizing collective resources to translate its ambitions into actionable outcomes. (IsDB News)

OIC Economies
Israel-Iran conflict may add up to $10 risk premium to oil prices

The conflict between Iran and Israel could add a geopolitical risk premium of $5-$10 to oil prices, as the Middle East region’s security risk rises, global rating agency Fitch has said. 

“We expect the geopolitical risk premium in oil prices to be contained at around $5-$10. Material disruption to Iran’s production or export infrastructure would add more upward pressure to prices,” Fitch adds. 

Iran produced about 3.26 million barrels a day of crude oil in 2024, according to OPEC.

“In the unlikely event that all Iranian exports are lost, they could be replaced by spare capacity from OPEC+ producers, which is around 5.7 million barrels a day. Higher oil prices would benefit the region’s oil producers, through higher fiscal and external revenues, particularly should they raise output to offset lower Iranian exports,” the Fitch report, published on June 16, read. 

Israel carried out a series of air strikes on Iran, attacking its top military brass and key nuclear sites and scientists on June 12, pushing oil prices high. Western Texas Intermediate (WTI) crude touched $76, its highest in several weeks prior to the conflict.  

“Israel has strong defensive countermeasures, and it appears that Iranian strikes have not had a material economic impact. We believe Iran’s capacity to retaliate against Israel via proxies in Gaza and Lebanon has been damaged by Israel’s military campaigns in those regions,” the rating agency said. 

“Both factors suggest it is likely that damage from Iran’s military response to Israel’s latest attacks will not be on a scale that would affect Israel’s rating,” Fitch adds. 

The agency downgraded Israel’s credit rating to 'A' from 'A+' last August, which it affirmed this March with a negative outlook, citing rising public debt, domestic political and governance challenges and uncertain prospects for the Gaza conflict. 

Fitch adds that the GCC states have condemned Israel’s attack on Iran, reinforcing that GCC-Iran relations remain fairly good and that an Iranian move against targets in the GCC is unlikely. 

Some sovereigns could also face credit profile downgrades, if the violence escalates. 

OIC Economies
Saudi GDP grows 3.4% in Q1, outpacing flash estimates 

Saudi Arabia’s economy grew more than expected in the first quarter of 2025, on non-oil and government activities, beating earlier government estimates. 

The kingdom’s first quarter gross domestic product (GDP) grew 3.4% year-on-year, beating flash estimates of 2.7% suggested by the country’s General Authority for Statistics in May. 

The growth was driven in part non-oil activities, which rose 4.9%, beating earlier estimates of 4.2%. Government activities grew 3.2% mirroring last month’s forecast

Oil growth contracted by 0.5%, improving against a 1.4% decline projected in May. 

Wholesale and retail trade, restaurants, and hotels recorded the highest growth rates during the first quarter of 2025, reaching 8.4% year-on-year and 0.7% quarter-on-quarter.

Saudi Arabia recorded strong employment growth since the start of the year, with jobs growing at the fastest pace in Q1 in over 12 years, according to a Riyad Bank survey. 

The seasonally adjusted Saudi Arabia Purchasing Managers’ Index rose to 58.1 in March, dipped to 55.6 in April and rose marginally in May to 55.8, but remained much lower than the recent peak of 60.5 at the start of the year. 

The International Monetary Fund lowered the kingdom’s 2025 GDP forecast to 3% in April, down 0.3% from its January projection. It expects the country to grow 3.7% next year, down from its previous forecast of 4.1%.   

The IMF said in May that the kingdom needs Brent at north of $92 a barrel this year to balance its budget. Oil will average $66.94 a barrel in 2025 and $62.38 a barrel next year, according to IMF’s regional economic outlook released last month.  
 

OIC Economies
OIC roundup: Development banks pledge $2bn for joint development projects

Here's a roundup of key developments across the OIC ecosystem during the month of May

Editor's note: The Islamic Development Bank has been noted for launching key development projects across member countries but it has, very recently, been joined by the Asian Development Bank, with each pledging a whopping $1 billion each to co-finance joint initiatives. 

 

 

Trade Developments


 

Image Courtesy: AP News

 

GCC / Malaysia

Gulf Cooperation Council, Malaysia agree to launch free trade talks

The Gulf Cooperation Council (GCC) countries have agreed to begin free trade talks with Malaysia, as announced during the GCC-ASEAN Summit in Kuala Lumpur.

 

The decision, made on May 26, 2025, marks the start of negotiations aimed at enhancing trade relations between the GCC and Malaysia. (Zawya)

 

Saudi Arabia / Syria

Syria, Saudi Arabia agree to boost economic cooperation

Syria and Saudi Arabia have announced plans to enhance economic cooperation for mutual benefit and to create jobs for Syrians, following the easing of Western sanctions on Syria earlier this month.

 

The announcement came during a visit to Damascus by Saudi Foreign Minister Prince Faisal bin Farhan, who met with Syrian President Ahmad al-Sharaa and other officials.

 

The easing of sanctions is expected to open the door for foreign investment in Syria, which has been in a civil war since March 2011. (AP News)

 

Investment


OIC

Development banks pledge $2bn for joint development projects

The Islamic Development Bank (IsDB) and the Asian Development Bank (ADB) have renewed their commitment to development by pledging $1 billion each in co-financing for joint operations in their Common Member Countries through 2030.

 

The aim is to enhance the effectiveness, impact, efficiency, and sustainability of their development operations. (IsDB News)

OIC Economies
Trump’s regional tour reinforces US-GCC ties amid strategic, economic realignments

United States President Donald Trump’s state visit to the Gulf region this week has underscored the renewed strategic alignment between Washington and the Gulf Cooperation Council (GCC), with both sides using the occasion to deepen defence, economic and diplomatic cooperation.

Trump’s three-day tour, which began in Saudi Arabia on May 13 and continues through Qatar and the United Arab Emirates, marks his first official overseas trip since retaking office in January. The visit also coincides with the GCC-US Summit, where Trump and Gulf leaders discussed regional security, trade, and investment strategies.

The Riyadh leg of the trip focused heavily on economic agreements and military cooperation. According to Saudi Crown Prince Mohammed bin Salman, more than $300 billion worth of deals were signed with US companies. These include a $142 billion defence package involving over a dozen firms, $80 billion in technology investments, and $19 billion in energy and aviation deals. Companies involved include Boeing, GE Vernova, Nvidia, and Oracle.

Nvidia and AMD also announced multi-billion-dollar chip deals with Saudi Arabia’s artificial intelligence firm Humain, while Saudi company DataVolt pledged to invest $20 billion in AI data centres and energy infrastructure in the US.

Despite the volume of announcements, Trump pressed Saudi Arabia for up to $1 trillion in investment commitments, far exceeding the current capacity of the Kingdom’s sovereign wealth fund, the Public Investment Fund. Organisers of the investment forum confirmed that 145 deals worth a total of around $300 billion had been signed so far.

In a high-profile speech at the US-GCC summit, Trump declared his intention to explore normalisation of ties with Syria’s new president, Ahmed al-Sharaa, and announced the lifting of US sanctions on Damascus. The move, made at the request of the Saudi Crown Prince and backed by Turkey’s President Recep Tayyip Erdogan, marks a major policy shift and raises questions over the future of US policy towards Iran and Syria.

Trump said lifting the sanctions would give Syria a “fresh start,” and urged Al-Sharaa to sign onto the Abraham Accords and assume responsibility for ISIS detention centres in northeast Syria.

While Syria was brought into the fold, Israel was notably absent from Trump’s itinerary. US officials cited heightened tensions in Gaza and stalled Saudi-Israel normalisation talks as key reasons. Saudi Arabia has insisted that any future recognition of Israel is contingent on a credible two-state solution for Palestine.

In Qatar, Trump is expected to discuss military cooperation and regional mediation efforts. Qatar, which hosts the largest US military base in the Middle East at Al-Udeid, is also playing a key role in Gaza ceasefire negotiations. 

The UAE leg of the trip will focus on economic collaboration, particularly in advanced technologies. In March, UAE National Security Adviser Tahnoon bin Zayed Al Nahyan committed $1.4 trillion in US investments over the next decade in sectors such as semiconductors, AI, and energy. Trump is also expected to reverse Biden-era export restrictions on AI and microchip technology to the UAE.

The GCC countries are among the top arms buyers globally. From 2020 to 2024, Saudi Arabia and Qatar each accounted for 6.8% of global arms imports, while the UAE accounted for 2.6%. The US remains the primary supplier for all three.

Bilateral trade between the US and GCC states exceeded $180 billion in 2024, and foreign direct investment flows remain strong. In 2023, UAE investment stock in the US totalled $35 billion, while Saudi Arabia’s stood at $9.6 billion and Qatar’s at $3.3 billion, according to US Department of Commerce data.

As Trump continues his Gulf tour, US-GCC relations appear to be entering a new phase, driven by transactional diplomacy, regional recalibration, and a shared interest in stability.

While questions remain over the durability of these partnerships and the broader implications for regional peace, the volume of agreements and strategic commitments point to a deepening alignment, one increasingly shaped by economics, security, and technology.
 

OIC Economies
Bahrain’s Mumtalakat reports highest ever net profit 

Bahrain’s sovereign wealth fund Mumtalakat has reported its highest ever net profit since it commenced operations in 2006. 

The fund’s consolidated net profit stood at 363 million Bahraini dinars ($965 million) in 2024, versus a net loss of 497 million Bahraini dinars ($1.3 trillion) the year before. 

"This has been a year of significant transformation, in which Mumtalakat successfully repositioned itself for long-term growth,” said Mumtalakat chairman Shaikh Salman bin Khalifa Al Khalifa.

The restructuring of McLaren Group and the fund’s partnership with Abu Dhabi-based investment vehicle CYVN Holding, contributed to its bottom line.

The group's share of profits from National Bank of Bahrain rose from 33.5 million Bahraini dinars in 2023 to 34.7 million Bahraini dinars last year. 

Bahrain Telecommunications Company reported 25.3 million Bahraini dinars in net profit last year, dipping nominally from 25.6 million Bahraini dinars recorded in 2023. 

Aluminium Bahrain (Alba) reported a net profit of 184.5 million Bahraini dinars in 2024, compared to 118 million Bahraini dinars in 2023.

CEO Shaikh Abdulla bin Khalifa Al Khalifa said that the fund remains committed to optimising, enhancing and growing its portfolio, to deliver sustainable long-term returns that support the kingdom’s economic objectives.

Consolidated revenues rose marginally from 2.1 billion Bahraini dinars in 2023 to 2.2 billion Bahraini dinars last year. Meanwhile, consolidated profit from continuing operations scaled to 544 million Bahraini dinars in 2024, versus a loss of 33 million Bahraini dinars the year before. 

Mumtalakat holds stakes in over 50 companies across financial services, telecommunications, real estate, logistics, consumer products, healthcare and education.

Mumtalakat’s assets under management (AuM) total $18 billion, trailing other biggest SWFs in the region, such as UAE’s Abu Dhabi Investment Authority (AuM: $1.1 trillion) and Saudi Arabia’s Public Investment Fund (AuM: $925 billion). 

The kingdom recorded a 2.6% growth in gross domestic product last year, fuelled by the non-oil sector which grew 3.8%. 


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