Slowing Regional Growth Amid Iran Conflict
DUBAI, April 14 (Reuters) – The International Monetary Fund reported that the Middle East and North Africa region is projected to see significantly reduced growth this year, mainly due to oil-exporting nations grappling with the fallout from the Iran war. The IMF’s latest World Economic Outlook lowered the region’s real GDP growth forecast to 1.1%, a sharp drop of 2.8 percentage points from its January projection. While growth is expected to recover to 4.8% in 2027, this rebound depends on energy production and transportation returning to normal in the coming months; the forecast may be revised if the conflict persists.
Impact of Conflict on Energy and Transportation
Tehran’s retaliatory attacks against Gulf neighbors, following U.S.-Israeli strikes that began in late February, have caused substantial damage to energy facilities and disrupted shipping through the Strait of Hormuz. This crucial passage typically handles about 20% of global oil and liquefied natural gas shipments.
The conflict has also fueled inflationary pressures and heightened uncertainty in the global economic outlook. Recent efforts at U.S.-Iran negotiations collapsed, with the U.S. military imposing a blockade on Iranian ports, although attempts to maintain dialogue continue.
Country-Specific Economic Forecasts
The IMF reduced GDP projections for regional nations, primarily due to lower production and exports, with the extent of the revision depending on infrastructure damage, reliance on the Strait of Hormuz, and alternative export routes. Saudi Arabia—the world’s largest oil exporter—is expected to grow by 3.1% in 2026, 1.4 percentage points less than the January estimate, but is anticipated to be less affected than its Gulf neighbors.
Iran’s economy is forecasted to contract by 6.1% in the fiscal year starting March 21, before rebounding with 3.2% growth the following year. Before the conflict, Iran was expected to see 1.1% growth this fiscal year. Bahrain, Iraq, Kuwait, and Qatar are also expected to experience economic contraction, though specific figures were not provided; a more detailed regional economic outlook is scheduled for release on April 16.
Effects on Oil and Gas Importers
GDP growth downgrades were less pronounced for regional oil and gas importers. For example, Egypt’s growth is now forecasted to slow to 4.2% in 2026 from an earlier estimate of 4.7%, with a recovery to 4.8% expected in 2027.
