Middle East economy faces 1.3% contraction due to Iran conflict

The Middle East economy is projected to contract by 1.3% this year due to the impact of the conflict involving Iran, according to the International Monetary Fund. The instability is causing disruptions in energy supplies, maritime navigation, and trade, while driving up costs for food, shipping, and insurance.

Gulf Cooperation Council (GCC) economies are expected to see a 4.8% contraction this year. The impact varies by geography; countries heavily reliant on the Strait of Hormuz, such as Qatar, Kuwait, and Bahrain, face significant pressure. In contrast, Saudi Arabia and the United Arab Emirates are expected to perform relatively better, while Oman may achieve positive growth due to its geographic position.

Economic expert Rabah Rezgui notes that rising oil prices may not offset these losses, as declines in production and exports in certain nations could outweigh the gains from higher prices. Additionally, the costs of repairing infrastructure and managing inflationary pressures on government budgets and consumers remain high. If disruptions persist through the second quarter of next year, oil prices could reach $130 per barrel.