The World Bank has slashed its 2026 growth forecast for Middle East economies, saying overall GDP growth in the region is expected to slow from an estimated 3.6% in January to 1.8% for 2026.
The closure of the strategic Strait of Hormuz, and destruction of energy and public infrastructure, had disrupted markets, increased financial volatility, and weakened the 2026 growth outlook, the World Bank Group said in its Economic Update for the Middle East, North Africa, Afghanistan and Pakistan.
The report was published as US President Donald Trump late on Tuesday announced a two-week ceasefire in the conflict with Iran after he had threatened to wipe out “a whole civilization.”
According to the World Bank, the conflict comes as an additional shock to a region already suffering from low productivity growth, limited private sector dynamism and persistent labor market challenges – underscoring the urgent need to strengthen governance and macroeconomic fundamentals and take action to boost long-term job creation and resilience.
The April 2026 World Bank’s Macro Poverty Outlook forecasts that the region’s aggregate (excluding the Iran) GDP growth will decelerate to 1.8 percent in 2026, down from 4.0 percent estimated for 2025. The 2026 forecast has been downgraded by 2.4 percentage points since the January projections, reflecting the adverse effects of the ongoing conflict.
GCC states
Growth in the Gulf Cooperation Council and Iraq, among the most heavily affected by the impact of the conflict, is expected to slow to 1.3% for 2026, down 3.1 percentage points from its January projection, and driven mainly by lower projected hydrocarbon revenues due to disruptions caused by the conflict.
Saudi Arabia: Forecast was downgraded by 1.2 percentage points since January. Growth is now expected to slow from 4.3% in 2025 to 3.1% in 2026, noting that Saudi Arabia’s outlook remains the strongest among Gulf economies.
United Arab Emirates: Growth forecast for the UAE has fallen by 2.7 percentage points since January. Growth is now expected to slow from 5% in 2025 to 2.4% in 2026.
Qatar: Notably, growth forecast for the Qatari economy has seen a sharp decline of 11.0 percentage points since January. The economy is now expected to record a contraction of 5.7%, down from an estimated growth of 5.3%, due to severe obstruction to liquefied gas supplies. Qatar is a key player in the global energy market, with a global market share of liquefied natural gas (LNG) supplies ranging between 20% and 21%.
Kuwait: Likewise, Kuwait’s economy is expected to register a significant contraction of 6.4%, compared to growth of 2.6% expected in January. Kuwait relies entirely (100%) on the Strait of Hormuz to export its crude oil and derivatives. Consequently, closing the strait would mean a complete shutdown of the country’s financial lifeline, immediately halting revenue inflows to the state budget.
Bahrain: Growth forecast for Bahrain’s economy has declined by 1.8 percentage points since January. Growth is now expected to slow from 3.1% in 2025 to 1.3% in 2026.
Sultanate of Oman: Growth forecast for Oman’s economy has decreased by 1.2 percentage points since January. Growth is now expected to slow from 3.6% in 2025 to 2.4% in 2026.
Iraq
The greatest shock in the World Bank report lies in the free fall of the Iraqi economy, as its growth forecast dropped from 6.5 percent to a staggering contraction of 8.6 percent.
This alarming figure reflects the situation faced by Iraq following the closure of the Strait of Hormuz.
Iraq — the second-largest producer within the Organization of the Petroleum Exporting Countries (OPEC) — experienced the largest drop in production, estimated at nearly 70 percent, dropping to about 800,000 barrels per day from 4.3 million barrels prior to the Strait of Hormuz crisis.
Egypt
Egypt’s situation in the World Bank report differs from that of some countries in the region that saw sharp contractions; the bank maintained its forecast for Egypt’s economic growth at 4.3%.
The World Bank said that “risks are tilted to the downside.”
It added that “in the event of a prolonged conflict, the current impacts on the region will be compounded–through elevated energy and food prices, declining trade, tourism and remittances, increased fiscal pressures, and displacement.”
Peace is a precondition for the region’s durable development
“The current crisis is a stark reminder of the work ahead for the region: not only to weather shocks, but to rebuild more resilient economies with stronger macroeconomic fundamentals, innovate and improve governance, invest in infrastructure, and boost employment-creating sectors,” Ousmane Dione, the World Bank's Vice President for the region said in a statement.
"Peace and stability are preconditions for the region’s durable development. With peace and the right action, countries can build the institutions, capabilities and competitive sectors that create opportunities for people,” he added.
As for Roberta Gatti, World Bank Group Chief Economist for the Middle East, North Africa, Afghanistan and Pakistan, she said: "As countries face the heavy toll of the present conflict, it is important to also not lose sight of the work needed for long-lasting peace and prosperity.”
