Gulf Remains Between Dubai and Its Neighbors

They say a rising tide lifts all ships, but the oil-rich economies of the Persian Gulf are likely to rise further and faster than most. With oil prices back around $70 a barrel and new hopes of a stronger-than-expected U.S. economic recovery, confidence is returning to the region after the somber reality check of the past year.

Six months ago, the region's economic planners were coming to terms with the prospect of their first budget deficits in almost a decade as crude hovered as low as $34 a barrel. But the possibility of stronger demand from the world's biggest economy could see a drastic turnaround in sentiment across the Middle East. Saudi Arabia, the region's economic powerhouse, is now predicted to post a "small" budget surplus this year, with only Oman and Bahrain, the minnows of the Gulf Cooperation Council, expected to slip into negative territory.

Higher oil prices will hurt developed economies. But resurgent growth in the Gulf could benefit U.S. and European exporters. Saudi Arabia, for example, has already committed to spend $400 billion over the next five years to build infrastructure and stimulate growth. Much of that work will be done by Western companies.