Middle East War Forces World Bank to Downgrade Economic Outlook
In its latest regional economic update, the Bank cited the closure of the Strait of Hormuz and widespread damage to energy and public infrastructure as factors disrupting markets, increasing financial volatility, and weakening the 2026 outlook across several regions.
The Middle East, North Africa, Afghanistan, and Pakistan were noted as particularly affected, with the conflict adding pressure to economies already challenged by low productivity, weak private sector dynamism, and persistent labor market issues.
Excluding Iran, regional growth is now projected to slow from 4% in 2025 to 1.8% in 2026, a 2.4 percentage point reduction from earlier forecasts. The steepest decline is expected in Gulf Cooperation Council (GCC) economies and Iraq, which are heavily exposed to the war. Growth in GCC countries was cut by 3.1 percentage points from prior projections, slowing from 4.4% in 2025 to 1.3% in 2026.
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