Security concerns can not overshadow the fact that the Middle East is booming. From the oil producers in the Gulf to the non-oil producing economies in the Levant, the region's economies are growing at unprecedented rates.
Despite the war in Iraq and persistent geopolitical uncertainties, last year saw the strongest growth in a decade. Indeed, behind East Asia, the Middle East was the fastest growing region in the world in 2003. This year is proving even better. Economic growth in the six-nation Gulf Cooperation Council (GCC) is set to exceed 7.5%, the highest in a decade. Saudi Arabia, the biggest economy and most populous country in the GCC, is on track to grow by 8%, its best performance since 1981. Iran should also register near 7% growth. Even the non-oil economies Jordan and Lebanon are doing well.
There is no doubt that oil is underpinning the boom. Persistent supply concerns and strong global demand have pushed oil prices past 20-year highs and lifted the region's production levels close to full capacity. Indeed, Middle East oil revenues (measured in US dollar terms) could reach an all-time high this year, exceeding even the levels set during the oil boom of 1981.
Windfall oil revenues have transformed public finances and external balances across the region. The combined net oil exports of the GCC are on course to exceed $180 billion this year, a jump of $30 billion from 2003. Saudi Arabia alone could earn over $105 billion from oil exports. Only Iraq will struggle to improve on 2003, reflecting the frequent terrorist attacks on the country's oil infrastructure.
Despite the boom, the region faces considerable challenges, not least the socio-economic pressures associated with a rapidly expanding indigenous population - over half the local population in the GCC is below 19 years of age. It is a similar picture elsewhere in the region. With increasing numbers of nationals entering the workforce each year, job creation is a top priority. To date, governments have focused on 'nationalizing' workforces, but this alone cannot address the problem.
More widespread reform is needed. The UAE and Qatar have spearheaded reform in the region. Elsewhere the response is still patchy and a lot still needs to be done especially if the region is to break free from the oil boom-bust cycles of the past. Nevertheless things are moving in the right direction.
Although the Middle East's fortunes remain inextricably linked to oil, this recent period of remarkable oil revenues offers the region's oil producers a unique opportunity to put their economies on a more sustainable long-term footing.
For the moment the region is on a roll: long may it continue.