Conflict Takes Economic Toll On Middle East

(MENAFN- Brazil-Arab News Agency (ANBA)) São Paulo – The conflict between the United States and Israel and Iran, which began in February this year, continues to impose high economic costs across the Middle East, North Africa, Afghanistan and Pakistan (MENAAP), with oil-exporting Gulf countries bearing a greater burden. This is according to the World Bank in a regional economic update released Tuesday (6).

According to the bank, the closure of the Strait of Hormuz has had a different impact on the region than previous energy shocks, which benefited oil exporters. The World Bank projects an average 2.1% contraction in MENAAPs regional output this year, after 3.3% growth in 2025. In the Gulf Cooperation Council countries (GCC, an alliance comprising Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Kuwait and Oman), the estimated contraction is 4.3%.

However, according to the financial institution, the economic repercussions across the MENAAP region extend beyond energy, also affecting tourism, aviation and logistics, while heightened uncertainty is weighing on financial markets and local business sentiment. Among oil-exporting countries, lower oil export volumes are causing not only substantial losses in output but also declines in government revenues, according to the World Bank.

The bank said inflationary pressures are increasing across much of the MENAAP region, driven mainly by higher food prices. Transport disruptions are raising import costs and straining supply chains, according to the report. In fragile economies already affected by conflicts, the shock is exacerbating existing vulnerabilities.

The analysis indicates that if the conflict eases by the end of this year, regional growth, excluding Iran, could rebound to 7.8% in 2027, largely driven by a recovery in hydrocarbon production and exports. Among the positive developments, the World Bank also said the region's oil-importing countries remain comparatively resilient, with economic growth projected at 4.3% in 2026, up from 3.9% in 2025.

The report, titled“From Divide to Opportunity: AI, Jobs, and Growth,” says that although the conflict is slowing growth in MENAAP, new opportunities are emerging, particularly in artificial intelligence, which has the potential to boost productivity in up to 20% of jobs in the region. World Bank Vice President for MENAAP Ousmane Dione said the region must prepare for a second long-term transformation: the rise of artificial intelligence.

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Translated by Guilherme Miranda

©Fatemeh Bahrami/Anadolu via AFP

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