This Briefing Paper considers the causes of the economic crisis of the 1980s against the background of fluctuating oil fortunes and new political movements in the Arab states. Some of the poor Arab countries, such as Yemen, Jordan and Algeria seem to have suffered substantially from the Gulf War outcome, although others such as Egypt have gained. The Gulf war may have marked the end of attempts to achieve cohesion in the Arab world through economic means, although it did trigger a sudden unexpected recovery of Arab aid flows. The paper concludes that, after the long boom, the countries of the Arab world face a difficult adjustment period, when falling living standards may lead to further political instability.