The International Monetary Fund has sharply lowered its 2026 growth forecast for the Middle East and North Africa to 1.1 per cent, citing severe disruptions to oil and gas exports caused by ongoing conflict. In its latest World Economic Outlook, the IMF warned that Iran, Iraq, and Qatar will be among the hardest hit, revising down its January prediction of 3.9 per cent regional growth for the year.
The weeks-long war has inflicted heavy damage on production facilities and effectively closed the Strait of Hormuz, the vital maritime chokepoint through which much of the Gulf’s energy resources reach global markets. As a result, Iran’s economy is projected to contract by 6.1 per cent this year—7.2 percentage points lower than previously forecast—while Qatar faces an 8.6 per cent contraction due to damage to its main liquefied natural gas production site. Iraq’s economy is expected to shrink by 6.8 per cent.
“For commodity exporters directly affected by the conflict, diminished production and exports imply a severe downward revision of GDP growth projections for 2026,” the IMF stated. The extent of the economic damage depends on the severity of infrastructure losses and the ability to use alternative export routes. Economies most affected include Bahrain, Iran, Iraq, Kuwait, and Qatar, while Oman, Saudi Arabia, and the United Arab Emirates are expected to see less significant impacts.
Bahrain and Kuwait, both heavily targeted and reliant on the Strait of Hormuz, are projected to contract by 0.5 and 0.6 per cent respectively, down from growth above 3 per cent last year. Saudi Arabia, the region’s largest economy and the world’s top oil exporter, is forecast to grow 3.1 per cent—down 1.4 percentage points—thanks in part to a pipeline that bypasses Hormuz. The UAE, which also has alternative export infrastructure, is expected to grow 3.1 per cent, down from 5.8 per cent in 2025.
The IMF noted that growth across the region should rebound in 2027, assuming energy production and transportation normalise within the next few months. However, it cautioned that this outlook could change if the conflict drags on or damage assessments worsen.
Energy-importing countries are also feeling the effects, with higher commodity prices driving down growth forecasts for nations like Egypt, whose outlook was cut by 0.5 percentage points to 4.2 per cent.
The report underscores how regional instability is rippling through the global economy, with energy supply disruptions and infrastructure damage weighing heavily on growth prospects across the Middle East and North Africa.
