Gulf Economies Could Grow 10.3% in 2027 as Iran Conflict Disruption Eases: World Bank

Gulf economies could stage a strong recovery in 2027 if the conflict involving Iran does not escalate before the end of this year, with the World Bank forecasting combined growth of 10.3 percent as oil production, shipping and wider economic activity return to normal.

The projection is based on an assumption that oil output and maritime transport recover from early 2027 after disruptions caused by the conflict, including extensive disruption to shipping through the Strait of Hormuz. The World Bank said trade, tourism and domestic economic activity could also rebound as the effects of the conflict fade.

The six Gulf Cooperation Council economies are expected to contract by 4.3 percent in 2026, according to the World Bank’s latest regional outlook.

Across the wider Middle East, North Africa, Afghanistan and Pakistan region, economic output is projected to decline by 2.1 percent this year, compared with growth of 3.3 percent in 2025.

The World Bank said that if the conflict subsides by the end of 2026, growth in the MENAAP region excluding Iran could reach 7.8 percent in 2027. The recovery would be driven largely by the restoration of hydrocarbon production and exports, although the bank warned that a sustained recovery would depend on continued policy measures.

Saudi economy set for strong rebound

Saudi Arabia’s economy is forecast to contract by 2 percent in 2026 before expanding by 7.9 percent in 2027.

The kingdom has been partly protected from the disruption to oil exports by its East-West Pipeline, which transports crude to the Red Sea port of Yanbu and provides an alternative route for exports.

Thomas Kuruvilla, managing partner of Arthur D. Little Middle East and India, said Saudi Arabia would enter the expected recovery with a broader economic base than during previous oil cycles.

Construction, logistics, business services, tourism and hospitality are expected to benefit from stronger economic activity, while continued investment under Vision 2030 could support longer-term development.

Kuruvilla said the key issue for 2027 would be whether the recovery in oil production translates into stronger private-sector activity, productivity and investment.

He also expects tourism to benefit significantly as Saudi Arabia develops new hospitality, entertainment and destination projects. He said destinations capable of attracting repeat visitors and establishing distinctive offerings would be well positioned to benefit.

Gulf outlook varies widely

The World Bank expects the wider Middle East and North Africa economy to contract by 2.8 percent in 2026, following growth of 3.4 percent in 2025.

Qatar is forecast to record the region’s strongest growth in 2027 at 26.7 percent as liquefied natural gas production resumes. Kuwait’s economy is projected to expand by 22 percent as oil exports return toward normal levels.

The UAE is expected to grow by 9.5 percent in 2027, while Bahrain and Oman are projected to expand by 4.2 percent and 3.4 percent, respectively.

Kuruvilla said greater regional stability and renewed economic activity could improve investor confidence, particularly if stronger private-sector cash flows and increased participation by private investors show that the recovery is becoming broader and more durable.