The ongoing conflict between Israel and Iran has led to a significant downgrade in the Gulf's economic outlook, according to GlobalData. Disruptions in the Strait of Hormuz have heightened shipping risks, increased costs, and delayed trade flows, affecting various sectors and undermining business confidence across the region.
Heightened security risks, including vessel seizures and damage to key infrastructure, have tightened logistics capacity and raised insurance and freight costs. This has impacted energy, transport, aviation, trade, tourism, and construction sectors, increasing costs and uncertainty. Ramnivas Mundada, Director of Economic Research at GlobalData, noted that economies heavily reliant on regional trade and energy-export logistics are most affected. "Supply-chain disruptions and postponed investment decisions are weighing on major corporates," he said.
The largest economic downgrades are expected in Qatar, with an 11.37 percentage point reduction, followed by Kuwait, Iran, and Bahrain. Oman, the UAE, and Saudi Arabia have also seen downgrades due to regional spillovers. Iran faces a pronounced contraction, with GDP expected to decline by 5.95% in 2026, compared to a previously estimated 1.50% decline.
Mundada emphasised that the outlook remains highly conditional on the duration of the conflict and the degree of disruption in maritime routes. A de-escalation could limit further economic downside, but continued disruptions would maintain pressure on non-oil activities and delay project pipelines
This story was selected and published by a human editor, with content adapted from original press material using AI tools. Spot an error? Report it here.
