IMF projects 2026 contraction in Middle East as Hormuz closure and Iran war bite

Mixed · 2The International Monetary Fund said in its latest World Economic Outlook, released on Tuesday 13 October 2026, that the Middle East is the only region expected to see its economy shrink this year. 1 2 Mixed · 2The IMF blamed the prolonged disruption to shipping through the Strait of Hormuz, which it linked to the Iran war; Al Jazeera describes the conflict as a US-Israel war on Iran. 2 1 Mixed · 2The two outlets quote different regional aggregates. The National reports the Middle East and North Africa contracting by 2 per cent, a 3.1 percentage-point downgrade from April. Al Jazeera reports the Middle East and Central Asia shrinking by 0.3 per cent, against 1.9 per cent growth projected in April. 1 2

Mixed · 2Kuwait, Iraq and Qatar face the sharpest 2026 contractions, at 16.7, 16 and 15.6 per cent respectively. Bahrain is forecast to shrink 11.3 per cent and Iran 7.6 per cent, with the National adding that Iran is also hit by enhanced sanctions and a US naval blockade. 2 1 Mixed · 2The National reports the UAE is projected to contract 3.9 per cent, a 7-point downgrade from April, and Oman is the only Gulf Cooperation Council member forecast to grow, at 4.1 per cent. Saudi Arabia is forecast to shrink 3.3 per cent after growing 4.6 per cent last year; the National attributes its milder fall to diversified export routes and Al Jazeera to increased oil exports via the East-West pipeline. 1 2 Mixed · 2Regional oil importers are expected to be more resilient: the National cites Egypt growing 5.1 per cent (over 8 points below April's forecast), Morocco 4.5 per cent and Jordan 2.7 per cent, and says the fund gave no projection for Lebanon. Al Jazeera notes Kyrgyzstan has the strongest growth in its region, at 9 per cent. 1 2

Centre · 1The forecast assumes a gradual reopening of the Strait of Hormuz from March 2027 and a return to prewar conditions by October 2027, which the IMF says would produce rebounds next year, including 7.7 per cent in the UAE, 7.9 per cent in Saudi Arabia, and 13.9, 17.1 and 18.8 per cent in Bahrain, Kuwait and Qatar. 1 Mixed · 2Globally, the IMF projects 3.1 per cent growth in 2026. The National says this was maintained and lifts 2027 to 3.4 per cent; Al Jazeera says it is up from 3 per cent in the previous outlook. Forecasts for 2026 include the US at 2.3 per cent, China at 4.5 per cent and the euro area at 1.1 per cent. 1 2 Centre · 1IMF chief economist Silvana Tenreyro described two opposing forces: a negative supply shock from the Iran war and a positive demand shock from the AI infrastructure boom. She said the economy's resilience is "reaching its limits" and that both forces add to inflation, with global headline inflation forecast at 4.7 per cent in 2026 and 4.1 per cent in 2027. 1

Left · 1The IMF listed risks including further conflict escalation, a reassessment of AI expectations, renewed trade tensions and fiscal vulnerabilities, with stronger AI investment or easing tensions as upside possibilities. 2 Centre · 1The National adds that Hormuz traffic has fallen after tanker attacks hit their highest weekly count this year on 9 October. Kpler data show one tanker crossing on Saturday versus eight the day before, with clearance about 30 per cent below the prewar baseline. It also reports Saudi Arabia vowing to keep supplying oil despite Houthi attacks. 1