Disrupted maritime trade is pushing several Gulf recovery economies towards contraction in 2026, with the International Monetary Fund’s latest forecasts showing a sharp deterioration in regional prospects.
Saudi Arabia’s economy is now projected to shrink by 3.3%, compared with the 1.7% growth expected in July. The IMF also forecasts contractions of 3.9% in the UAE, 16.7% in Kuwait and 15.6% in Qatar, according to Reuters.
The projections place shipping access at the centre of the gulf recovery outlook. The IMF assumes the Strait of Hormuz will reopen in March 2027, with shipping returning broadly to pre-war conditions by October that year. These dates underpin its forecasts rather than represent a confirmed reopening schedule.
Pressure Extends Beyond Energy Exports
In an October 1 address to Gulf finance ministers and central bank governors, IMF Managing Director Kristalina Georgieva said restricted access through Hormuz and disruption in the Red Sea had reduced oil and gas exports.
Damage to energy infrastructure has added to production constraints. Meanwhile, weaker trade, declining business confidence and higher prices for essential goods have affected activity outside the energy sector.
Alternative Routes Become a Policy Priority
Gulf authorities have redirected supplies and supported businesses and banks to limit the economic damage. However, the IMF cautioned that financial reserves alone cannot protect economies from prolonged interruptions to physical trade.
The fund highlighted the GCC Railway and Saudi Landbridge as infrastructure projects that could reduce losses during a Hormuz closure while strengthening regional commerce under normal conditions.
Recovery Remains Conditional
The IMF expects a stronger regional performance in 2027 if shipping gradually normalises. A longer or more severe disruption could postpone that rebound and complicate investment, diversification and employment plans.
Its policy recommendations include temporary, targeted support for affected households and companies, alongside continued reforms to expand private enterprise and improve the business environment.
