Tunisia economic outlook tied to Middle East conflict scenarios

Economist Aram Belhadj has outlined three potential economic scenarios for Tunisia based on the evolving conflict in the Middle East and its impact on global oil prices.

The most likely scenario involves a frozen conflict with no definitive resolution. In this case, oil prices would range between $95 and $110 per barrel, potentially leading to a budget deficit of approximately 20 billion dinars, a trade deficit of 25 billion dinars, and foreign exchange reserves covering 90 days of imports by year-end.

A second scenario involves negotiated de-escalation in the Strait of Hormuz and the Bab el-Mandeb Strait. This would likely lower oil prices to between $75 and $85 per barrel, helping to stabilize foreign exchange reserves, slow deficit growth, and reduce inflation toward 5%.

The third and most dangerous scenario involves major escalation, such as large-scale US-Israeli strikes or Iran withdrawing from the Non-Proliferation Treaty. This could lead to the near-total closure of key maritime straits, driving Brent crude prices to between $130 and $150 per barrel. Such an event could result in a budget deficit exceeding 22 billion dinars and inflation rising above 8%.