The decrease in the economic growth of Gulf Arab countries to 1.3% in 2026 is a sign of the severe vulnerability of these countries to regional developments. The recent war between the United States and Israel against Iran and the closure of the Strait of Hormuz, a global energy chokepoint, have had profound impacts on the economies of these countries.
Economic Impacts of the Closure of the Strait of Hormuz
About 20% of the world's energy and a significant portion of the oil and liquefied gas from Gulf countries are exported through the Strait of Hormuz. According to the Atlantic Council report, about one-third of the world's seaborne crude oil trade and 13% of maritime chemical trade pass through this strait. Following the recent war, the closure of this strait has dealt a severe blow to the economic foundation of the region, particularly affecting countries like Kuwait and Qatar that are more reliant on oil exports.
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Declining Growth Trend and Economic Vulnerability
The World Bank's April 2026 report predicts that the overall economic growth of Gulf countries will decrease to 1.3% in 2026. This decline represents a drop of 3.1 percentage points compared to previous forecasts, with Kuwait, Qatar, and Bahrain facing negative growth this year. Kuwait is expected to record the worst performance with a negative growth of 6.4%, while Qatar will see a negative growth of 5.7%.
In contrast, the UAE and Saudi Arabia, with positive but reduced growth, seem to have managed to reroute some of their oil exports through alternative pipelines. Meanwhile, Bahrain, with a debt-to-GDP ratio of 147%, is considered the most vulnerable economy in the region.
Overall, these developments indicate the structural fragility of the economies of Gulf Arab countries, which remain dependent on oil and gas. According to data from the International Monetary Fund, the breakeven oil price needed for budget balance in these countries shows that they have been vulnerable to oil price fluctuations even before the war.
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