IMF cuts 2026 growth forecasts for Gulf economies due to prolonged Hormuz closure

The International Monetary Fund has reduced its projections for growth in Gulf economies for 2026 due to the ongoing closure of the Strait of Hormuz and the pushback on when it might reopen. The IMF also lowered its outlook for the broader Middle East and North Africa region. The region is expected to experience a 2% contraction this year, a 3.1 percentage point drop from April's projections.

It is the only region anticipated to record a contraction in 2026. IMF chief economist Silvana Tenreyro explained that the economic outlook is influenced by two main factors: a negative supply shock from the Iran war and a positive demand shock from the AI infrastructure boom. Global growth for 2026 is forecast at 3.1%, with an increase to 3.4% for 2027.

Despite the challenges, the global economy has managed to endure the energy shock from the Iran war due to supply adjustments, reduced inventories, lower energy intensity, and households and companies adapting to higher prices. The latest forecasts follow Saudi Arabia's pledge to persist with oil supply despite recent attacks by the Iran-backed Houthi rebels.

The number of vessels passing through the Strait of Hormuz has decreased recently, with one tanker crossing on Saturday, down from eight the day prior. Hormuz clearance stands at around 11.9 million barrels per day, approximately 30% below its pre-war level, according to Kpler data. IMF projections show that the economy is resilient but its resilience is nearing its limit, requiring a shift from coping to rebuilding fiscal space and supply-side resilience.