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Gulf States: Economies Remain Unevenly Disrupted, Six Months on from the Iran War
(MENAFN- DBRS Morningstar) Summary
As the Iran war and the disruption in the Strait of Hormuz mark six months, most of the economies of the Gulf states remain under strain. The Memorandum of Understanding (MoU) between the US and Iran that extended the April ceasefire by another 60 days broke down and ended on 17th August 2026 without plans for an extension. Hostilities have returned and the US has announced tougher sanctions on Iran.
Over the past six months, the economic performance among the Gulf Cooperation Council (GCC) countries has diverged significantly, with Kuwait, Qatar, and Bahrain the most affected and on course to post large declines in real GDP growth this year. At the other end, the United Arab Emirates (UAE), Saudi Arabia, and Oman have fared better largely reflecting their lower reliance on the Strait for their exports. Oil production is increasing, while support measures and domestic spending have helped cushion part of the economic impact from the Iran war. But the lack of resolution of the Middle East conflict will keep uncertainty in the region elevated.
Key Highlights
-- The Iran war and the Hormuz disruption continue to have an uneven impact across the Gulf states' hydrocarbon production and exports.
-- While tourism seems to be recovering, forecasts point to significant deceleration in growth in some GCC countries or severe economic contractions in others.
-- No resolution to the conflict appears in sight. Downside risks include re-escalation of the conflict and closure of the Bab el-Mandeb Strait on the Red Sea.
"The Gulf economies are set to remain unevenly disrupted until a lasting and full re-opening of the Strait of Hormuz is agreed" said Adriana Alvarado, Senior Vice President in the Global Sovereign Ratings Group. "Oil producers in the Gulf have been increasing oil production and exports, but overall exports remain low in most Gulf economies."
As the Iran war and the disruption in the Strait of Hormuz mark six months, most of the economies of the Gulf states remain under strain. The Memorandum of Understanding (MoU) between the US and Iran that extended the April ceasefire by another 60 days broke down and ended on 17th August 2026 without plans for an extension. Hostilities have returned and the US has announced tougher sanctions on Iran.
Over the past six months, the economic performance among the Gulf Cooperation Council (GCC) countries has diverged significantly, with Kuwait, Qatar, and Bahrain the most affected and on course to post large declines in real GDP growth this year. At the other end, the United Arab Emirates (UAE), Saudi Arabia, and Oman have fared better largely reflecting their lower reliance on the Strait for their exports. Oil production is increasing, while support measures and domestic spending have helped cushion part of the economic impact from the Iran war. But the lack of resolution of the Middle East conflict will keep uncertainty in the region elevated.
Key Highlights
-- The Iran war and the Hormuz disruption continue to have an uneven impact across the Gulf states' hydrocarbon production and exports.
-- While tourism seems to be recovering, forecasts point to significant deceleration in growth in some GCC countries or severe economic contractions in others.
-- No resolution to the conflict appears in sight. Downside risks include re-escalation of the conflict and closure of the Bab el-Mandeb Strait on the Red Sea.
"The Gulf economies are set to remain unevenly disrupted until a lasting and full re-opening of the Strait of Hormuz is agreed" said Adriana Alvarado, Senior Vice President in the Global Sovereign Ratings Group. "Oil producers in the Gulf have been increasing oil production and exports, but overall exports remain low in most Gulf economies."
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