Sri Lanka, March 31 -- A new United Nations Development Programme assessment is warning of sweeping economic fallout across the Middle East from the ongoing Iran war, with the GDP of regional Arab countries projected to shrink by as much as 6%.

The report estimates losses of between $120 billion and $194 billion, driven by disruptions to energy flows, trade routes and financial markets rippling far beyond the battlefield.

"The escalation is transforming a localized conflict into a systemic regional shock," the UNDP said, pointing to collapsing shipping volumes, rising insurance costs, and volatile oil prices hitting interconnected economies.

The impact is uneven but severe. Gulf economies and countries in the Levant are expected to bea...