The IMF has revised its 2026 growth projections for the Middle East and Central Asia downward, citing active armed conflict as a factor weighing on economic output across both regions. In its most recent World Economic Outlook, the fund projected a 0.3 percent contraction for the region — a turnaround from the 1.9 percent growth that had been anticipated six months prior.
The forecast pointed to a more extended shutdown of the Strait of Hormuz than the April report had assumed, with recovery projected for 2027 once the waterway returned to operation.
Hostilities in the Middle East — which broke out in late February following air strikes attributed to the United States and Israel against Iran — have since prompted Tehran to assert control over the Strait of Hormuz, with vessels transiting the waterway without its clearance coming under repeated attack. A counter-blockade targeting Iranian ports has been put in place by Washington, while naval escorts for allied vessels passing through the waterway have grown steadily in frequency.
According to IMF findings, oil infrastructure damage, disrupted shipping lanes, and constrained production left Iraq, Kuwait, Qatar, and Bahrain absorbing a disproportionate share of the wartime economic toll across the Gulf region. Forecasts point to those economies shrinking by double digits in 2026, then rebounding by a comparable margin the following year once output, trade flows, and supply chains return to more typical levels.
A forecast from the international lending body put Saudi Arabia's economy on a path of 3.3 percent contraction this year, with output projected to swing back toward 7.9 percent expansion in the following year. Fatalities had already been recorded at the Riyadh airport by the time that forecast was released, with a series of strikes there having unfolded in the days prior.
The report placed the kingdom — which leads the world in crude oil exports — toward the lower end of regional exposure, citing an economy whose export pathways have broadened beyond a single channel. Crude shipments destined for the Red Sea coast moved through the East-West pipeline, allowing the Hormuz strait to be bypassed entirely. Drone and missile strikes attributed to Iran-linked Iraqi armed factions knocked the pipeline out of service for a stretch during September.
Houthi forces, whose ties to Tehran have drawn repeated international attention, have carried out a series of strikes on Saudi oil facilities and vessels operating in the Red Sea since armed hostilities between the group and Yemen's Riyadh-supported government resumed in July.
Forecasters expect the UAE's output to shrink by 3.9 percent — a notable figure given the country's shoreline along both entrances to the Strait of Hormuz. Among Gulf states, forecasts place Oman as the sole economy on track to record expansion this year, with projected growth of 2.4 percent.
The IMF's forecast placed Iran's economy on a downward trajectory, with output expected to shrink by 7.6 percent — a contraction the fund attributed to the combined weight of active conflict, an imposed blockade, and American economic penalties. The institution projected that nations across much of the Arab world would hold up reasonably well against disruptions to energy and food prices.
