IMF warns Middle East conflict threatens regional economies

The International Monetary Fund (IMF) has warned that ongoing conflict in the Middle East and subsequent disruptions to energy production, shipping routes, and critical infrastructure pose the greatest risk to the economies of the Middle East and Central Asia.

Speaking at the IMF and World Bank annual meetings in Bangkok, Jihad Azaouar, Director of the Middle East and Central Asia Department, noted that the war is delivering an uneven economic shock, with directly affected countries facing the most intense pressure. While pre-war surpluses, alternative routes, and the use of reserves helped mitigate the impact of energy shocks following US-Israeli strikes on Iran and the subsequent closure of the Strait of Hormuz by Tehran, Azaouar cautioned that these buffers are limited due to declining inventories and reduced spare production capacity.

The IMF projects that the Middle East, North Africa, and Pakistan region will experience a 1.3% contraction in 2026, following a 3.3% growth in 2025. A strong but uneven recovery of 6.6% is anticipated in 2027, assuming trade and shipping return to normal levels by the first quarter of that year. Oil-exporting nations directly impacted by the conflict are expected to see significant contraction this year before a sharp rebound in 2027.