In an assessment outlining key messages for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP), the IMF said growth in the region is now projected at just 1.4 percent in 2026, marking a 2.3 percentage point downgrade from its October forecasts.
Egypt and its peers face external pressures
Oil-importing economies, including Egypt, Jordan, Lebanon, and Pakistan, are facing mounting external vulnerabilities.
According to the IMF, Egypt’s currency has depreciated by around 12 percent since the start of the war, acting as a key shock absorber, while sovereign spreads have widened by more than 60 basis points.
The fund estimates that for oil-importing emerging markets in the region, a 10 percent increase in oil prices reduces output by 0.5 percent and raises inflation by around one percent, while widening fiscal and external deficits.
Oil shock disrupts one-fifth of global supply
The crisis centres on the near shutdown of the Strait of Hormuz, through which around 20–21 million barrels per day, about one-fifth of global oil supply, normally flows, according to the statement.
Production losses across key Gulf producers, including Saudi Arabia, Iraq, Kuwait, and the UAE, have exceeded 10 million barrels per day, alongside 500 million cubic metres per day of natural gas.
The IMF also flagged significant damage to Qatar’s Ras Laffan LNG facility, which accounts for about 17 percent of global LNG capacity, amplifying supply constraints.
Global growth at risk as inflation rises
Under a baseline scenario where disruptions ease by mid-2026, global growth is expected to slow to 3.1 percent in 2026 and 3.3 percent in 2027, both below the historical average of 3.7 percent.
However, in a more severe scenario with oil averaging $110 per barrel, global growth could drop to 2.6 percent, while inflation rises to 5.4 percent, the IMF said.
Sharp divergence across the region
The economic impact remains highly uneven. Qatar has recorded the largest growth downgrade globally, nearly 15 percentage points, reflecting infrastructure damage and halted LNG exports.
By contrast, Oman faces only a modest downgrade of around 0.5 percent, benefiting from higher oil prices and its geographic position outside the Strait of Hormuz.
Across the Gulf, five of eight oil exporters, including Bahrain, Iran, Iraq, Kuwait, and Qatar, are now expected to see economic contractions in 2026.
Trade, food, and transport disruptions intensify
The shock has extended beyond energy markets. European gas prices have surged by 60 percent, while fertilizer prices have risen by around 40 percent, increasing risks to global food supply chains.
Gulf economies, which account for over 40 percent of global sulfur exports and about 20 percent of ammonia and nitrogen fertilizer exports, are crucial to agricultural inputs worldwide.
At the same time, air traffic has plunged across major hubs, with departures falling by roughly one-third in Abu Dhabi, two-thirds in Dubai, and three-quarters in Doha, as logistics and shipping routes face mounting disruptions.
Fragile states face a deepening crisis
The IMF warned that low-income and conflict-affected economies, including Yemen, Sudan, the West Bank and Gaza, Syria, and Somalia, face the most severe risks.
In these countries, food accounts for up to 50 percent of imports, while more than half the population, in some cases, already faces food insecurity, leaving them highly exposed to rising import costs and declining reserves.
Central Asia's growth slows despite resilience
In the Caucasus and Central Asia, growth is projected to slow to 4.8 percent in 2026, down from 6.2 percent in 2025, as spillovers from the Middle East conflict add to existing pressures.
Inflation across the region is expected to remain elevated at around eight percent, although public debt remains relatively contained at 23.4 percent of GDP.
Policy focuses on targeted support
The IMF urged the MENAP governments to prioritize targeted support for vulnerable households while avoiding costly, broad-based subsidies, particularly for fuel.
It also called for a tighter monetary policy where inflation persists, stressing the need to strengthen infrastructure resilience, diversify trade routes, and enhance regional cooperation to better absorb future shocks.
The fund said it stands ready to scale up financing and support programmes across the region if risks intensify further.
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