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The World Bank has sharply downgraded its 2026 economic growth forecasts for the wider Middle East, warning that conflict-related disruption to energy infrastructure and the Strait of Hormuz closure have materially altered the regional outlook.

The World Bank’s 8 April update projects overall GDP growth in the Menaap region – excluding Iran – at 1.8% for 2026, down from an estimated 4.0% in 2025, and 2.4 percentage points below the bank’s January projections.

Severe GCC downgrade

The decline is concentrated in GCC economies and Iraq, which the report identifies as most heavily affected by the conflict. The World Bank has downgraded its GCC forecast by 3.1 percentage points since January, projecting growth of 1.3% in 2026 against 4.4% in 2025.

Kuwait and Qatar experienced the sharpest downgrades. Qatar’s forecast has swung 11.0 percentage points, from growth of 5.3% in January to a projected contraction of 5.7%, driven by severe obstruction to its liquefied natural gas exports.

Kuwait has swung 9.0 percentage points, from growth of 2.6% to a projected contraction of 6.4%. Both are the least economically diversified GCC members and the most exposed to energy-related disruptions.

Saudi Arabia’s growth has been revised to 3.1%, down 1.2 percentage points from a pre-conflict projection of 4.3%, making it the strongest outlook among Gulf economies.

The UAE is now forecast to expand by 2.4%, down from 5.1%. Bahrain and Oman are projected to grow 1.3% and 2.4%, down from 3.1% and 3.6%, respectively.

The World Bank noted that the UAE retains sufficient fiscal space to absorb temporary spending pressures and recover quickly should the conflict remain short-lived.

Scarring beyond the ceasefire

The report was published on the same day that US President Donald Trump announced a two-week ceasefire, subject to Iran’s agreement to pause its blockade of the Strait of Hormuz.

The World Bank resisted optimism, however, with chief Memaap economist Roberta Gatti warning that even an immediate end to hostilities would not undo the economic damage, stating that scarring from damaged infrastructure, eroded human capital and sustained investor caution can outlast the conflict itself.

In a prolonged conflict scenario, the bank identified compounding risks through elevated energy and food prices, declining trade, tourism and remittances, increased fiscal pressures and displacement.

The World Bank stated it would not publish forecasts beyond the 2025/26 fiscal year for Iran, citing exceptionally high uncertainty, and estimated that real GDP contracted by 2.7% in the fiscal year to 20 March 2026. The decision to withhold forward guidance is without recent precedent in the bank’s semi-annual updates.

The structural argument

The World Bank’s vice president for Menaap, Ousmane Dione, described the crisis as a reminder of the need to rebuild more resilient economies, identifying peace and stability as preconditions for durable development.

As recently as October 2025, the World Bank had projected GCC growth of 4.4% in 2026. The conflict has not merely deferred that recovery; it has inverted it.

The revised figures will feed directly into sovereign credit assessments and project financing decisions throughout the second quarter. Kuwait and Qatar, both now in projected contraction, face the most acute near-term fiscal pressure.

The ceasefire, if it holds, shifts the question from damage containment to the pace and completeness of recovery. The World Bank’s warning on scarring suggests that the pace will be slower than markets currently assume.

READ THE APRIL 2026 MEED BUSINESS REVIEW – click here to view PDF

Economic shock threatens long-term outlook; Riyadh adjusts to fiscal and geopolitical risk; GCC contractor ranking reflects gigaprojects slowdown.

Distributed to senior decision-makers in the region and around the world, the April 2026 edition of MEED Business Review includes: