The six economies of the Gulf Co-operation Council will contract by 4.8 per cent in 2026 before rebounding by 9.1 per cent in 2027, according to the International Monetary Fund's October Regional Economic Outlook, as disruption to shipping through the Strait of Hormuz cuts deep into the region's oil and gas output.
The worst-hit are the states most dependent on the strait. The IMF forecasts output in Kuwait to fall by 16.7 per cent this year, in Qatar by 15.6 per cent and in Bahrain by 11.3 per cent. Saudi Arabia and the UAE, which can route some exports through pipelines that bypass Hormuz, are forecast to shrink by 3.3 and 3.9 per cent respectively. Oman is the only GCC member expected to grow, by 4.1 per cent.
Output collapse and partial recovery
Oil and gas production among the region's exporters fell from about 33 million barrels a day in February to about 19 million in May, the IMF said. Qatar's output dropped by as much as 86 per cent. Production picked up in September and further in October, with some shipments moving under US military escort.
The World Bank, in its own October update, projects a 4.3 per cent contraction for the GCC this year and notes that, unlike past oil shocks, this one has hurt Gulf exporters most.
Assumptions behind the rebound
The IMF assumes disruption continues through the first quarter of 2027, after which hostilities end and traffic through the strait gradually recovers.
Tim Callen, a visiting fellow at the Arab Gulf States Institute and former head of the IMF's GCC division, warned that if hostilities do not end, growth is likely to fall short of the projected rebound. Bahrain, with very high government debt, is the most financially exposed; the other GCC states retain substantial buffers.