World Bank Slashes 2026 Middle East Growth Forecast, Saudi Arabia Absorbs Shock

A cargo ship in the Arabian Gulf near the Strait of Hormuz (Reuters)
A cargo ship in the Arabian Gulf near the Strait of Hormuz (Reuters)
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World Bank Slashes 2026 Middle East Growth Forecast, Saudi Arabia Absorbs Shock

A cargo ship in the Arabian Gulf near the Strait of Hormuz (Reuters)
A cargo ship in the Arabian Gulf near the Strait of Hormuz (Reuters)

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.”



UK Inflation Holds Steady at 2.8% Ahead of Bank of England Decision

A shopper in a London supermarket (EPA)
A shopper in a London supermarket (EPA)
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UK Inflation Holds Steady at 2.8% Ahead of Bank of England Decision

A shopper in a London supermarket (EPA)
A shopper in a London supermarket (EPA)

British inflation unexpectedly held at 2.8% for May, unchanged from the 13-month low reached in April, official figures showed on Wednesday, a day before the Bank of England will announce its next interest rate decision.

Sterling weakened a little against the US dollar after the data and investors slightly trimmed their expectations for a rate rise later this year.

Economists polled by Reuters had forecast a rise to 3.0% for May, as the US-Iran war kept British inflation almost a percentage point higher than the BoE had forecast in February.

Lower prices than in April for meat, ⁠vegetables and dairy products ⁠as well as domestic heating oil helped offset a jump in airfares and petrol, the Office for National Statistics said.

Inflation has been above the BoE's 2% target for most of the past five years.

In April, the BoE said it was likely to rise above 3.5% by the end of the year and potentially exceed 6% early next year under the most adverse of three scenarios.

However, ⁠financial markets this week have drawn comfort from an interim agreement between the US and Iran which promises to reopen the Strait of Hormuz, a major corridor for oil exports, and is due to be signed in Switzerland on Friday.

"Today's data strengthens the case for a continued cautious approach from the Bank of England," Yael Selfin, chief economist at KPMG, said.

"Underlying inflationary pressures have yet to show clear signs of strengthening, which is likely to underpin a majority decision within the Monetary Policy Committee to hold interest rates at Thursday's meeting," she said.

Economists polled by Reuters expect the BoE's Monetary Policy Committee to vote 7-2 to keep rates on hold at 3.75%.

While Governor Andrew Bailey says ⁠the BoE has ⁠time to wait to assess the impact of the conflict, some policymakers worry businesses will use it to raise prices more broadly, or that it could dent households' confidence in the BoE inflation target.

Britain has been more affected than most Western countries by the conflict due to its reliance on imported natural gas and manufacturers reported an 8.7% annual rise in their raw material costs for May, the biggest since February 2023.

Services price inflation - which the BoE views as a guide to underlying price pressures - rose to 3.7% in May from 3.2% in April, in line with economists' forecasts.

The rise in services inflation partly reflected a 10.3% monthly jump in airfares, which are volatile. High Easter prices were not captured in April 2026 data but were in 2025.

Core inflation, which excludes food, energy, alcohol and tobacco prices, rose slightly less than expected to 2.6% from 2.5%.


Gold Steady as Investors Await Details of US-Iran Deal, Fed Verdict

People walk past a gold business shop at the Grand Bazaar in Istanbul, Türkiye, Tuesday, June 16, 2026. (AP)
People walk past a gold business shop at the Grand Bazaar in Istanbul, Türkiye, Tuesday, June 16, 2026. (AP)
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Gold Steady as Investors Await Details of US-Iran Deal, Fed Verdict

People walk past a gold business shop at the Grand Bazaar in Istanbul, Türkiye, Tuesday, June 16, 2026. (AP)
People walk past a gold business shop at the Grand Bazaar in Istanbul, Türkiye, Tuesday, June 16, 2026. (AP)

Gold prices were steady on Wednesday, near a one-week high, as investors awaited further details on the US-Iran agreement and the Federal Reserve's policy decision from Kevin Warsh's debut meeting as Chair.

Spot gold was flat at $4,331.29 per ounce, as of 0420 GMT. U.S. gold futures for August delivery was down 0.1% at $4,351.40.

Bullion touched an ‌over one-week ‌high of $4,370.82 on Monday.

Details of a US-Iran interim deal ‌to ⁠end the conflict ⁠are emerging, with President Donald Trump saying it would rule out a nuclear weapon for Tehran and a US official saying it would allow Iran to sell oil once signed.

Oil prices hovered near a three-month low on expectations of Iranian supply, easing inflation concerns.

"The rally (in gold) is losing some steam as all eyes turn to the ⁠monetary policy announcement from the Fed," said Ilya Spivak, ‌head of global macro at ‌Tastylive.

"This marks the first FOMC meeting to be chaired by Kevin Warsh and ‌traders still seem unsure about how he will reconcile a ‌hawkish record, rising inflation, and pressure from a White House demanding a dovish pivot," Spivak said.

Most Fed policymakers now feel they will need to keep US short-term borrowing costs on hold all year, projections due out later ‌in the day are expected to show, with a small number seen penciling in a rate ⁠hike to ⁠stop a spike in inflation from getting entrenched in the economy.

Traders see a 59% chance of a US rate hike in December, down from about 70% last week before the US-Iran peace deal announcement, according to the CME FedWatch tool.

Gold tends to lose appeal when rates are high, as it does not yield interest.

"Over the longer term, structural support (for gold) is expected to persist, driven by ongoing Asian demand and continued central bank purchases as a hedge against geopolitical and policy risks," Westpac analysts wrote in a research note.

Spot silver fell 0.2% to $70.05 per ounce, platinum lost 0.7% to $1,792.05, and palladium was down 0.8% at $1,341.23.


Oil Dips as Investors Weigh Deal on Iran War as Uncertainty Persists on Hormuz

 A person prepares to pump gas at a Valero gas station on June 16, 2026 in Austin, Texas. (Getty Images via AFP)
A person prepares to pump gas at a Valero gas station on June 16, 2026 in Austin, Texas. (Getty Images via AFP)
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Oil Dips as Investors Weigh Deal on Iran War as Uncertainty Persists on Hormuz

 A person prepares to pump gas at a Valero gas station on June 16, 2026 in Austin, Texas. (Getty Images via AFP)
A person prepares to pump gas at a Valero gas station on June 16, 2026 in Austin, Texas. (Getty Images via AFP)

Oil prices inched lower on Wednesday, extending the previous session's declines as investors assessed the US-Iran peace deal, though uncertainty over the full resumption of shipping through the Strait of Hormuz limited further falls.

Brent crude futures dipped 16 cents, or 0.2%, to $78.80 a barrel by 0340 GMT, while US West Texas Intermediate fell 25 cents, or 0.3%, to $75.80 a barrel.

Both benchmarks fell about 5% for a second straight session on Tuesday to stand at three-month lows, on hopes that a US-Iran deal would allow oil flows through the Strait.

"Markets are broadly stripping out ‌the embedded geopolitical risk ‌premium in oil prices," said Priyanka Sachdeva, senior market analyst at ‌Phillip ⁠Nova.

"That said, the ⁠path toward normalization remains far from straightforward. While political agreements may be progressing, physical tanker traffic through the Strait has yet to fully recover."

The deal would provide for the United States to lift its blockade of Iran's ports, while Tehran would allow oil tanker traffic through the Strait, effectively blocked since US and Israel strikes on February 28.

"Oil markets retreated on expectations the Strait of Hormuz would reopen following the peace agreement, but traders held off further ⁠selling pending details," said Hiroyuki Kikukawa, chief strategist of Nissan ‌Securities Investment.

WTI is likely to stay volatile in ‌a range of $10 above or below $80 a barrel, he added.

Before the closure, about a fifth of ‌global crude oil and liquefied natural gas supplies flowed through the Strait.

Details of ‌the interim peace deal began to emerge on Tuesday, with President Donald Trump saying it would rule out a nuclear weapon for Tehran and a US official saying it would allow Iran to sell oil upon signing.

The memorandum of understanding, not yet public, extends by another 60 days a ‌tenuous ceasefire agreed in April, so as to allow room for talks toward a permanent truce.

Still, industry officials say a ⁠full return to ⁠pre-war production and refining levels is likely to take weeks, months or even years.

Israel has distanced itself from both the April ceasefire and the latest US-Iran pact, fueling uncertainty about whether it will hold.

Israeli drone strikes targeted three vehicles in southern Lebanon on Tuesday, killing at least four and wounding others, Lebanon's National News Agency said, prompting a rare public rebuke from Trump.

China's crude oil throughput fell 9.1% in May on the year to its lowest in almost four years, data showed, also signaling that refiners were starting to draw on stockpiles amid the Iran war.

The American Petroleum Institute report showed US crude stocks fell 8.3 million barrels in the week ended June 12, the sources said.

It exceeded expectations for a draw of 4.6 million barrels, with official numbers due from the Energy Information Administration at 10:30 a.m. ET (1430 GMT) on Wednesday.