Iran war scars will hinder Gulf growth until 2030, IMF warns

• ‘Scarring impact on various sectors’
• Slow return to pre-war trajectory
• Relative recovery forecast for 2027

Gulf economies will be “scarred” by regional conflict as growth is likely to remain below pre-war levels through to the end of the decade, according to the International Monetary Fund.

The economies of the six countries of the Gulf Cooperation Council – Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE – are collectively forecast to contract by 4.8 percent this year, followed by a “strong recovery” of as much as 9.1 percent in 2027, Jihad Azour, director of the IMF’s Middle East and Central Asia department, said on Thursday.

“We will not go back to the pre-war trajectory in the medium-term because this shock will have a scarring impact on various sectors,” he said.

Azour said the conflict was the “largest oil shock” in the last six decades.

Crude oil prices are expected to be 41 percent higher this year than in 2025, and gas prices 48 percent higher, based on an extrapolation of data from September 21, the IMF previously said.

While the US-Iran conflict remains unresolved and a fresh outbreak of attacks takes place between Saudi Arabia and Houthi rebels from Yemen, Azour stressed the outlook depends “critically” on how quickly energy production and trade can normalise.

Pre-war surpluses, output from non-Gulf producers, alternative transport routes, adjustment in demand and substantial inventory drawdowns have all helped to cushion the blow of the conflict, Azour said.

However, he cautioned: “These buffers bought time, but they are finite. Inventories are lower, spare capacity is tighter and renewed disruption could generate much larger price adjustments.”

A recovery in 2027 is based on the assumption that trade and shipping return to normal during the first quarter, with exports expected to normalise around the middle of the year.

“The expected gradual normalisation of energy production and trade will drive a sharp rebound of GDP in 2026, but output will remain below the medium-term path projected before the conflict,” he said.

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Azour said the recovery across the GCC would vary according to countries’ exposure to disruption in the Strait of Hormuz, their fiscal capacity and the strength of their financial reserves.

Kuwait and Qatar are “highly affected” because of their limited ability to bypass the strait and their constrained fiscal space, he said.

Saudi Arabia and the UAE, by contrast, have access to alternative export routes and financial buffers that have helped them withstand the shock. Oman, which lies outside the Strait of Hormuz, has been less affected.

“Countries who have a high level of buffers, strong institutional framework as well as a diversified economy, will have the capacity to rebound quickly and achieve a higher level of growth,” said Azour.