Illustration of oil tankers idle at anchor in the Gulf at sunset, representing the IMF Middle East GDP forecast and Hormuz disruption.

IMF Middle East GDP Forecast: Region to Shrink 0.3% in 2026

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The IMF Middle East GDP forecast released Tuesday, Oct. 13, delivered the bleakest regional outlook in the fund’s new World Economic Outlook. The International Monetary Fund now expects the Middle East and Central Asia region to contract 0.3% in 2026, down from the 1.9% growth it projected in April, as the U.S.-Israel war on Iran keeps the Strait of Hormuz largely shut to normal traffic.

It is the only region in the IMF’s tables expected to shrink this year. The steepest projected declines fall on Gulf oil producers that have few ways to move crude and gas except through Hormuz.

The numbers in the IMF Middle East GDP forecast

According to the IMF figures reported by Al Jazeera and The National, the hardest-hit economies in 2026 are:

  • Kuwait: -16.7%
  • Iraq: -16.0%
  • Qatar: -15.6%
  • Bahrain: -11.3%
  • Iran: -7.6%, also weighed down by tighter sanctions and a U.S. naval blockade
  • United Arab Emirates: -3.9%, a 7-point downgrade from April
  • Saudi Arabia: -3.3%, after 4.6% growth last year

Saudi Arabia’s contraction is milder because it has been able to divert part of its oil exports through the East-West pipeline to Red Sea ports, the fund said. Oman is the only Gulf Cooperation Council member projected to grow in 2026, at 4.1%. Kyrgyzstan is forecast to post the region’s fastest growth at about 9%.

The National also reported that the IMF’s narrower Middle East and North Africa grouping is estimated to contract 2% this year, a downward revision of 3.1 percentage points from April.

Why the Strait of Hormuz drives the downgrade

In peacetime, about one-fifth of the world’s oil supply moves through the Strait of Hormuz. The IMF cited the prolonged disruption to shipping there as the main reason for the regional cut. Its baseline now assumes the strait begins a gradual reopening in March 2027, with a return to prewar conditions by October 2027, and that uncertainty stays high through next year.

Shipping data underline how severe the disruption is. Analytics firm Kpler put confirmed Hormuz flows at roughly 11.9 million barrels per day, about 30% below the prewar baseline, with daily readings swinging sharply, The National reported. Attacks on tankers have continued, as tracked in our report on Iran Strait of Hormuz maritime incidents this month.

The Gulf is also absorbing pressure from Yemen, where Houthi missile fire has reached Saudi territory, including the deadly strike covered in our Riyadh airport attack report.

A sharp rebound is built into the forecast

The IMF’s outlook is not uniformly grim. If shipping normalizes on the fund’s timetable, it projects large rebounds in 2027: 18.8% growth for Qatar, 17.1% for Kuwait, 13.9% for Bahrain, 7.9% for Saudi Arabia and 7.7% for the UAE. Those figures largely reflect production coming back online from a depressed base rather than new capacity.

Energy importers in the wider region are expected to hold up better. The IMF forecasts Egypt to grow 5.1% in 2026, Morocco 4.5% and Jordan 2.7%. The fund did not publish projections for Lebanon.

Global picture: growth holds, inflation rises

At the global level, the IMF expects world output to grow 3.1% in 2026. IMF chief economist Silvana Tenreyro described the outlook as the net result of two opposing forces: the supply shock from the Iran war and a demand boost from the build-out of artificial intelligence infrastructure. “The economy has been resilient, but that resilience is reaching its limits,” she told reporters.

Among major economies, the fund projects 2.3% growth for the United States, 4.5% for China and 1.1% for the euro area. Global headline inflation is forecast to rise to 4.7% in 2026 before easing to 4.1% in 2027. The IMF listed further conflict escalation, a reassessment of AI expectations, renewed trade tensions and fiscal weaknesses as the main downside risks.

For American consumers, the most direct channel is energy and freight costs. Higher shipping rates linked to the conflict have already rippled through supply chains, as explained in our look at who is profiting from rising shipping costs.

What to watch

The IMF’s numbers rest heavily on its Hormuz assumption. Any earlier reopening would lift Gulf output quickly, while a wider conflict would push the reopening date further out. Investors will also watch bond markets, where higher energy prices and interest rates have pushed long-term borrowing costs to multi-decade highs in several advanced economies.

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