Gulf countries facing plunge as conflict disrupts energy markets, Reuters says
Investing.com -- Gulf Cooperation Council (GCC) economies are facing their steepest downturn since the pandemic, as the U.S.-Israel conflict with Iran disrupts energy markets and regional stability, according to a Reuters poll.
According to a Reuters report the conflict has triggered a supply shock in global energy markets, sending oil prices soaring. But unlike past oil spikes that benefited the Gulf, infrastructure damage and the near closure of the Strait of Hormuz—a vital route for a fifth of global energy—have severely hampered production and exports.
Economists have sharply cut 2026 growth forecasts: Qatar, Kuwait, and Bahrain are now expected to contract by 6.0%, 4.4%, and 2.9%, reversing previous growth projections. The UAE is forecast to stagnate, down from earlier expectations of 5% growth.
Saudi Arabia and Oman are expected to fare slightly better, with projected growth of 2.6% and 2.2%, though these figures are still well below earlier estimates, according to a Reuters report.
Analysts in the Reuters report warn that the economic damage will persist, with energy infrastructure rebuilding and supply chains not fully restored until late 2026. Key non-oil sectors, such as tourism and retail, are also expected to be hit hard.
If the conflict ends soon, economists expect a strong rebound in 2027. Qatar, the UAE, and Kuwait could grow by 7.8%, 5.4%, and 5.0%, lifted by recovering energy output and public investment.
Inflation is set to rise across the region due to high oil prices, with Bahrain’s 2026 forecast at 2.4% and other GCC countries also facing higher costs.
Overall, while the GCC economies face a sharp and uneven downturn in the short term, a recovery remains likely in the medium term, contingent on the resolution of the ongoing conflict and restoration of energy infrastructure.