Gulf's oil exporters face deep recessions, says IMF

By the Editorial Team · Friday, October 23, 2026

The IMF has downgraded its 2026 growth forecast for the Middle East and North Africa to a contraction of over 1 percent, citing deep recessions in oil-exporting Gulf countries due to disruptions from the U.S.-Iran conflict. The closure of key waterways like the Strait of Hormuz and damage to energy infrastructure have sharply reduced oil output, with recovery dependent on the reopening of these routes and stabilization of regional hostilities.

The International Monetary Fund (IMF) has sharply downgraded its economic growth forecasts for the Middle East and North Africa (MENA) region in 2026, predicting deep recessions among oil-exporting countries affected by the ongoing conflict between the United States and Iran. Previously forecasted to grow by around 2.3 percent, the region is now expected to contract by more than 1 percent in GDP, according to the IMF’s latest outlook.

The revised projection follows a significant escalation in hostilities, which have disrupted key energy production and trade routes. The conflict has led to the closure of the Strait of Hormuz—an important maritime passage for global oil shipments—and expanded fighting into Saudi Arabia and Yemen. These developments have pushed oil prices to a five-month high of $112 per barrel. The IMF highlighted “exceptionally high uncertainty” surrounding the outlook, citing risks of further disruptions that could drive energy prices even higher.

Among the Gulf Cooperation Council (GCC) countries, the smallest and most oil-dependent economies are expected to experience the most severe downturns. Qatar, the world’s second-largest exporter of natural gas, is projected to suffer a 15.6 percent contraction in output this year, accompanied by an 86 percent decline in oil and gas production. Kuwait and Bahrain are forecast to see GDP decreases of 16.7 percent and 11.3 percent, respectively. Saudi Arabia, the region’s largest economy, and the United Arab Emirates are also expected to face recessions, with output contracting by 3.3 percent and 3.9 percent, respectively.

Oman stands out as the only Gulf economy with improved growth prospects in 2026. Its relative insulation from the Strait of Hormuz closure and increased oil production have cushioned it from the broader regional downturn.

The Gulf’s oil and gas sector has suffered significant revenue losses and physical damage to infrastructure amid attacks linked to Iran. Average oil output in the region dropped from 33 million barrels per day in February to around 19 million barrels per day in May. Production has likely declined further following a partial blockade of the Bab el-Mandeb strait by Yemeni Houthi forces, which restricts access between the Red Sea and the Gulf of Aden. Saudi Arabia has experienced its lowest fossil fuel output levels in recent weeks but has resumed some exports via its east-west pipeline to the Red Sea, which has a capacity of up to seven million barrels daily.

The IMF noted that reopening the Strait of Hormuz could trigger a sharp “V-shaped” economic recovery in the Gulf, with growth potentially rebounding to approximately 6.6 percent in 2027 if oil and gas shipments resume.

On the geopolitical front, the United States has signaled it will avoid military strikes on Iranian targets until after the November mid-term elections. Meanwhile, reports indicate that Israel’s Prime Minister Benjamin Netanyahu had prepared for a large-scale military offensive on Iranian sites, including civilian infrastructure such as electricity generators and nuclear facilities, earlier in the month.

Overall, the Gulf region is poised to be one of the poorest-performing economic areas globally in 2026, as broader world economic output remains relatively resilient to the energy shocks caused by the conflict. The IMF emphasized that the downgrade is concentrated among Gulf oil exporters directly impacted by the hostilities, while other parts of the MENA region, including Bahrain, Iraq, Kuwait, and Qatar, face substantial economic contractions due to hydrocarbon disruptions and secondary effects on trade, logistics, and business confidence.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.