Christian Bueger, Professor of International Relations, University of Copenhagen, Denmark
Since Israel and the United States initiated strikes on Iran in February 2026, the situation has escalated quickly across the Gulf region. Yet, the economic impact has been felt globally: the closure of airspaces in one of the world’s most important transit regions has affected tourism economies worldwide. Ongoing restrictions on shipping in the Strait of Hormuz - through which not only a fifth of the world’s fossil fuels are transported, but also a third of fertilisers –, have strained the global economy, with rising food and energy prices and the risk of global stagflation looming.
While it is difficult to determine when hostilities will fully end, it is time to consider the consequences of the war. What are the implications for the Western Indian Ocean region, both in the short and long term?
Security Spillovers Beyond the Gulf
In hard security terms, the direct military impact beyond the Gulf has been limited. Yet incidents indicate that the conflict is not confined to the immediate Gulf. The sinking of the IRIS Dena off the coast of Sri Lanka by a US submarine has raised questions about if and where the US might strike, and with what humanitarian and environmental consequences. Enforcing its naval blockade, the US has moreover started to seize ships in the Indian Ocean.
Iranian missile attacks on the US military base on the Chagos Archipelago have demonstrated Iran’s capability and intent to hit targets across the broader region. Through its proxies, such as the Houthi forces operating from Yemen, Iran potentially can threaten shipping in the Red Sea and Bab el-Mandeb Strait – another vital shipping route.
Economic Vulnerabilities of Island States
The economic impact has been more severe and has been felt most strongly by the region’s small island states, which are fully dependent on tourism income and energy imports. The number of visitors arriving in Seychelles – an economy heavily reliant on tourism –, dropped rapidly to forty percent of normal levels. First assessments concluded that the economy of Mauritius could be significantly impacted. Other economic impacts include a decline in remittances from workers in the Gulf region and restrictions on exports – ranging from rice and eggs to cars –, to Gulf states.
Diversification and Energy Transition
One response to the economic challenges is the diversification of trade routes and supply chains. Countries located near alternative trade routes, such as the port states of Mauritius and Madagascar, might benefit from such shifts.
Another lesson is the need to reduce dependency on fossil fuels. It is time for the region to kick-start its green energy transition. India, Madagascar, and Sri Lanka have invested in wind energy, but continue to have significant untapped resources. Where wind is not viable, terrestrial and floating solar farms, as well as tidal energy projects, should be explored. Subsea energy cables could also help create interconnected regional green energy markets.
For island nations, regional economic integration and connectivity – through frameworks such as the Indian Ocean Commission or the Indian Ocean Rim Association –, are more important than ever, as they can provide better risk mitigation and protection against economic shocks.
Maritime Security Challenges
How is maritime security in the region affected, and what responses are needed?
The Western Indian Ocean is home to significant “blue crime,” which undermines economic development. This includes narcotics smuggling, illicit fishing, and piracy, particularly by groups operating from Somalia. Attacks by Houthi forces in the Red Sea and the Bab al-Mandeb Strait present additional risks to the maritime transport industry.
The conflict in the Gulf further increases uncertainty in the maritime domain of the Western Indian Ocean and the risk of increasing crime. A crucial factor is the future role of the US in the region. Many current maritime security structures are either led by the US –, such as the Combined Maritime Forces, which provide intelligence and key naval task forces to counter maritime crime -, or supported by it, for instance through the annual capacity-building exercise Cutlass Express.
Shifting Geopolitics and Regional Responses
The US will likely maintain its force posture in the region and continue much of this work. Yet whether regional nations will be willing to follow US leadership to the same extent is an open question. US soft power has clearly diminished, and its, at times, unpredictable foreign policy – which has damaged regional economies through the war –, will not be easily forgotten.
The Combined Maritime Forces structure may weaken, as countries and regional blocs seek to enhance their strategic autonomy from US leadership. At the same time, maintaining efforts to combat blue crime remains essential.
Closer collaboration between regional states and organizations – such as the Gulf Cooperation Council, the Indian Ocean Commission and its Regional Maritime Security Architecture, and frameworks like the International Maritime Organization-facilitated Djibouti Code of Conduct –, will be vital.
Looking Ahead: Persistent Instability
This is all the more important as a more unstable Iran could lead to increased criminal activity in the Western Indian Ocean. Narcotics smuggling networks already operate from the Iranian coastline, and the Iranian fishing fleet has been linked to illicit fishing in the region.
By hijacking three vessels, Somali pirates have already tested the waters. How Houthi forces will threaten sea lanes remains to be seen. Overall, the maritime domain will be more politicised and more volatile in the future.
Regional leaders must recognise that an end to hostilities in the Gulf war will not mean a return to the status quo. Planning for the long-term strategic impact is essential. Strengthening regional connectivity and energy markets, and regional maritime security cooperation will be key for ensuring sustainable prosperity and peace in the Western Indian Ocean region.
Charles Telfair Centre is an independent nonpartisan not for profit organisation and does not take specific positions. All views, positions, and conclusions expressed in our publications are solely those of the author(s).
Main photo: The strategically important shipping route of the Strait of Hormuz is pictured separating the nations of the United Arab Emirates and Iran from NASA.
