The economies of the Middle East, North Africa, Afghanistan, and Pakistan region are projected to contract by 2.1% in 2026, with Gulf Cooperation Council states expected to contract harder, by an average of 4.3%, according to a new World Bank report released on Tuesday.
Qatar and Kuwait are expected to be the hardest-hit GCC economies, with GDP forecast to contract by 20.9% and 14.6%, respectively, in 2026. The United Arab Emirates and Saudi Arabia are projected to be the least affected among GCC members, with their economies forecast to contract by 1.6% and 2.0%, respectively.
Qatar’s economy, facing its weakest growth forecast in decades, has been heavily affected by the closure of the Strait of Hormuz. Average monthly natural gas production in Qatar fell by approximately 67% between March and July 2026, compared to the same
period in 2025.
Gulf oil production collectively has fallen from around 26 million barrels per day before to around 16 million barrels per day in March, according to the World Bank.
The disruption has also driven inflation higher across the Gulf. Qatar’s food inflation exceeded 12% year-on-year as of June, while average overall inflation remained at around 2%. In Bahrain and Oman, food inflation surpassed 7%, while headline inflation stood at around 3%.
Iraq, Iran face sharp GDP declines as oil production falls and inflation surges
In Iraq and Iran, GDP is forecast to decline by 12.4% and 7.7%, respectively, with both countries operating at just 55% to 70% of their estimated oil production capacity. In Iran, inflation has also surged, rising from around 32% in mid-2024 to 89% in August 2026, according to World Bank figures.
Lebanon has also felt the economic impact of the conflict, although its inflation rate has eased from the sharp rise seen during the early months of the war and currently stands above 15%. Gasoline prices have risen by at least 40% in Lebanon, while diesel prices have increased by more than 80%. Fuel prices in the West Bank and Gaza have also risen by more than 40%.
Oil-importing economies have proved more resilient, with regional growth expected to reach 4.3% in 2026, compared with 3.9% in 2025. However, importing countries, like Egypt, Jordan, Morocco, Pakistan and Tunisia, remain vulnerable to the economic fallout of the conflict. They face higher inflation as oil and other commodity prices rise, reduced fiscal room, potentially lower remittances from Gulf economies and higher borrowing costs, driven in part by increased insurance risk premiums as the conflict continues.
World Bank forecasts 7.8% regional economic rebound in 2027 if conflict ends
Excluding Iran, the World Bank Group macroeconomic models projected that, if the conflict ended this year, regional economies would rebound sharply to 7.8 percent in 2027, driven by a recovery in hydrocarbon production, the normalization of trade routes, and base effects.
The global economy was able to absorb much of the shock from the blockade, the World Bank noted, as pipelines in Saudi Arabia and the UAE bypassed the disruption and brought an additional 2.8 million barrels per day to global markets. Brazil, Kazakhstan, Venezuela and the United States also continued exporting, while inventories helped make up shortfalls and global demand fell by an estimated 5.8 million barrels per day compared with pre-conflict levels.
World Bank warns extreme weather could worsen food shortages across the region
While the impact of the blockade has so far remained manageable for most countries, the World Bank warned that El Niño could pose an additional threat to food security across the region, where families are already facing risks from declining humanitarian aid funding.
Alongside Pakistan and Afghanistan, which are directly exposed through changing monsoon conditions and heat stress, the World Bank warned that Egypt, Iraq, and Tunisia needed close monitoring given existing water stress.
