Middle East economy to shrink 2.1% in 2026, Gulf economies by 4.3%, World Bank forecasts
Despite grim forecasts, the World Bank projects regional economies could rebound by 7.8% in 2027 if the conflict ends this year, though the Hormuz blockade and inflation remain major threats
Assessment
The World Bank is signaling that the economic damage from the current conflict is not a short-term blip but a structural drag that will deepen into 2026. The Gulf states, often seen as insulated, are forecast to take a disproportionate hit at 4.3 percent, likely because of the Hormuz blockade disrupting oil and trade flows. The 7.8 percent rebound projection for 2027 is conditional on the conflict ending this year, which makes the timeline for a ceasefire an immediate economic question. Watch whether the blockade and inflation force policy shifts before the 2026 contraction materializes.