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

The International Monetary Fund has dramatically reduced its 2026 growth predictions for Gulf economies due to the ongoing closure of the Strait of Hormuz and the delay of its reopening. In its latest World Economic Outlook, published on Tuesday, the IMF also revised downward its projections for the entire Middle East and North Africa region.

The Middle East and North Africa is anticipated to experience a decline of 2 percent this year, which is a reduction of 3.1 percentage points from the April projections. It is the sole region forecasted to encounter an economic contraction this year. The IMF kept its global growth forecast for 2026 at 3.1 percent and increased its projection for 2027 to 3.4 percent.

"This outcome is a result of two primary factors shaping the outlook," IMF chief economist Silvana Tenreyro informed reporters, mentioning the adverse supply shock from the Iran war and the positive demand shock from the artificial intelligence infrastructure growth. The fund attributed the global economy's ability to withstand the impact of the Iran war energy shock to factors such as supply adjustment, inventory reduction, decreased energy intensity, and households and businesses adapting to higher prices.

The latest forecasts come as Saudi Arabia pledged to continue bringing its oil supplies to market despite recent attacks by Iran-backed Houthi rebels on the kingdom. The number of vessels passing through the Strait of Hormuz has decreased in recent days following a week of record tanker attacks on October 9, with only one tanker crossing the waterway on Saturday, down from eight the day before, according to data from analytics firm Kpler.

Confirmed total Hormuz clearance stands at roughly 11.9 million barrels per day, or about 30 percent below its pre-war baseline, according to Kpler data, although daily readings have fluctuated considerably. Energy supply disruptions from the Iran war are the latest in a series of shocks the global economy has faced in recent years, including the 2025 tariffs dispute, Russia's 2022 invasion of Ukraine, the Covid-19 pandemic, and the subsequent global tightening cycle.

IMF chief economist Silvana Tenreyro stated, "The economy has been resilient, but that resilience is reaching its limits." "The challenge ahead is to transition from coping to rebuilding, restoring fiscal space and rebuilding supply-side resilience." IMF chief economist Silvana Tenreyro emphasized that while the global economy has been resilient, its ability to withstand shocks is reaching its limits.