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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)
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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.”

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Business

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.

Business

Energy Sector Clears ‘Hormuz’ After US-Iran Deal, Risk Premium in Focus

Ships wait to transit the Strait of Hormuz on June 15. REUTERS
Ships wait to transit the Strait of Hormuz on June 15. REUTERS
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Energy Sector Clears ‘Hormuz’ After US-Iran Deal, Risk Premium in Focus

Ships wait to transit the Strait of Hormuz on June 15. REUTERS
Ships wait to transit the Strait of Hormuz on June 15. REUTERS

The energy sector and the global economy have avoided the worst-case scenario: oil at $150 a barrel.

That was the level many financial institutions and international companies had used in shaping their investment assumptions. International officials and governments also expected it and aligned with those forecasts.

For the global economy, $150 oil would have meant an energy sector slipping out of control, with damaging consequences for other industries. That did not happen. Brent crude is now trading at about $80 a barrel, roughly $70 below that feared level and above its pre-war price of $70.

With shipping through the Strait of Hormuz resuming after a preliminary peace agreement reached by the United States and Iran, expected to take effect next Friday, energy is again moving to the center of the global economic picture. For years, the sector has supported global growth, development and market stability, helping shield international markets from sudden shocks.

What comes after the agreement?

Since the preliminary US-Iran agreement was announced, oil prices have fallen by nearly $20 a barrel. That is a major cost relief for countries that import crude, and one that is likely to feed through to many other goods, given oil’s role as a basic input in finished products.

Stock markets rose in parallel, lifted by optimism over the reopening of the Strait of Hormuz and the return of shipping to normal. The prospect of commodity prices easing back toward pre-war levels could support corporate earnings and the wider global economy.

But Mamdouh Salameh, an international energy expert, said prices would not return to pre-war levels so easily.

“The current situation indicates that Iran controls 20% of global oil and gas supplies as a result of its closure of the Strait of Hormuz. Therefore, oil prices after the agreement must take into account a permanent price premium because of Iran’s control of the Strait of Hormuz,” Salameh told Asharq Al-Awsat.

Speaking from London, Salameh said that even after the strait reopens, “the volume of oil flowing through it will fall to half its pre-war level because of the damage sustained by oil production facilities in the Arabian Gulf.”

He expected repairs to some facilities to take about eight to 12 months. “For this reason, Brent crude will not return to its pre-war level of $60 to $65 a barrel, but will range between $85 and $90 for many years to come,” he said.

Spot premiums for crude oil and some refined products in Asian markets fell on Tuesday, settling at pre-war levels after the announcement of the preliminary agreement between Washington and Tehran. Still, caution over the timeline for restoring normal navigation has so far placed a floor under energy prices, preventing a sharper decline.

Supply and demand

Saudi Aramco President Amin Nasser estimated that the oil market loses about 100 million additional barrels for every week the Strait of Hormuz remains closed, after the crisis had already removed about 1 billion barrels from supply.

Nasser said in remarks in mid-May that the gap was being covered through withdrawals from strategic and commercial inventories.

About 20% of global oil supplies pass through the Strait of Hormuz. Its closure has tested the depth of strategic inventories worldwide and posed a major challenge to the global energy sector. That was clear in moves by the International Energy Agency and its members to draw from strategic reserves.

Estimates of global demand growth this year range from 700,000 to 900,000 barrels per day. That suggests demand will remain strong long after Hormuz reopens, driven by daily oil needs for power generation and normal consumption, as well as the need to rebuild inventories.

Asia is the most exposed. The US Energy Information Administration estimates that 84% of the crude oil and condensates that passed through Hormuz in 2024 went to Asian markets, led by China, India, Japan and South Korea.

Against this backdrop, Aramco, the Saudi oil giant, said its maximum production capacity remains intact and that the company can, if requested by the government and within allocated quotas, return to maximum sustained capacity in less than three weeks.

QatarEnergy, among the hardest hit, said it expects to raise natural gas production to about 50% of capacity one month after safe passage through the Strait of Hormuz is restored.

The world is now waiting for the terms of the preliminary agreement between the United States and Iran to be disclosed, so implementation can begin. Only then can a timeline be set for ships to reach “zero waiting,” followed by the return of Gulf production capacity.

Haitham El-Gendy, an international markets expert, said, “The matter depends on how quickly navigation through the Strait of Hormuz returns to pre-war levels, and how quickly supplies from the Gulf region resume. Both issues depend primarily on hostilities not resuming during the 60-day negotiation period.”

“If we assume that things will proceed well, a return to normal will require weeks, given the scale of tanker congestion around the strait and the need to remove mines,” El-Gendy told Asharq Al-Awsat. “As for Gulf supplies, this will also require varying periods depending on the extent of the damage to each country’s energy facilities.”

According to Wood Mackenzie, halted crude production fields in the region will return to 70% of their previous output within three months and about 90% within six months. For liquefied natural gas, of which Qatar produces one-fifth of global supply, a return to full production capacity will take several months and could stretch into years after damage to the Ras Laffan facility.

On crude prices, El-Gendy said that if tensions do not flare again, oil could move in the $80-a-barrel range, with room to rise, as countries replenish inventories and strategic reserves depleted in recent months and Chinese demand recovers to pre-war levels.

Business

Syria Signs Gas Sector Contract with US Energy Giant

A screen displays the logo for ConocoPhillips on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid
A screen displays the logo for ConocoPhillips on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid
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Syria Signs Gas Sector Contract with US Energy Giant

A screen displays the logo for ConocoPhillips on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid
A screen displays the logo for ConocoPhillips on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid

Syria on Tuesday signed a contract involving US oil giant ConocoPhillips to develop the country's gas sector, state media reported, as Damascus seeks to attract international energy investment.

Damascus previously signed memoranda of understanding on energy with international companies including Chevron as well as HKN Energy, which has begun managing and operating oil fields recently handed over to the government by Syrian Kurdish authorities.

State news agency SANA reported that the state-owned Syrian Petroleum Company signed "a contract with US companies ConocoPhillips and Novaterra with the aim of developing a number of gas fields in Syria and increasing production from existing fields".

The move seeks to "contribute to supporting the energy system and strengthening gas supplies required for the electricity sector and other vital sectors," it said.

In Washington last week, Syrian Petroleum Company CEO Youssef Qablawi said it would be "the biggest contract" to be signed since the new authorities took power after the December 2024 ouster of longtime ruler Bashar al-Assad.

At the signing ceremony in Damascus, Qablawi said the move was "an important step in the process of developing the gas sector in Syria".

"Through this cooperation, we look forward to increasing production, improving operational capabilities and supporting the energy system," he added.

A Syrian delegation headed by Energy Minister Mohammad al-Bashir held talks in Washington last week on investment prospects in energy and infrastructure in Syria and possible partnerships with the US private sector.

After years of civil war that fractured the country and ravaged its industries and infrastructure, Syria is seeking to modernize its energy infrastructure, attract investment and boost development as it pushes on a path of economic recovery, particularly after the lifting of Assad-era sanctions.

Syria aims to produce one million barrels of oil per day by 2030 and is seeking to broaden international cooperation on exploration and production.

Last month, Syria signed a memorandum of understanding with ConocoPhillips, France's TotalEnergies and Qatar's QatarEnergy, on offshore oil and gas exploration.

In February, it also signed a preliminary deal with US energy giant Chevron and Qatari firm Power International for offshore energy exploration.

Damascus now controls all the country's oil and gas fields, after taking over areas previously under Kurdish control in the north and northeast this year.

The deputy governor of the northeastern Hasakah province, Ahmed al-Hilali, on Monday said HKN Energy had begun managing and operating those fields.