Gulf Economies Brace for Deeper 2026 Contraction as Hormuz Bottleneck Persists — Key Market Signals to Monitor

A Reuters poll of economists conducted between July 7 and July 16, 2026, shows that most Gulf Cooperation Council (GCC) economies are now expected to contract more sharply this year than forecast in April, as disruptions to shipping through the Strait of Hormuz continue following renewed U.S.-Iran tensions. Oil prices have climbed nearly 20% this month to around US$85 per barrel, but for Gulf producers, export capacity rather than price has become the primary constraint.

2026 GDP forecast revisions (vs. April poll)

1. Kuwait: −8.1% (previously −4.4%)
2. Qatar: −8.1% (previously −6.0%)
3. Bahrain: −5.1% (previously −2.9%)
4. UAE: −0.5% (previously flat)
5. Saudi Arabia: +1.4% (previously +2.6%; below the IMF's 1.7% estimate)
6. Oman: +3.1% (previously +2.2%)

Saudi Arabia and Oman remain the only GCC economies expected to expand in 2026, supported by alternative export routes that bypass the Strait of Hormuz.

Economists surveyed also expect a recovery in 2027 if regional tensions ease, with projected GDP growth of 10.1% for Kuwait, 7.8% for Qatar, 6.0% for Saudi Arabia, 5.8% for the UAE, 4.5% for Bahrain, and 2.8% for Oman.

Inflation across the Gulf is expected to remain relatively contained despite higher transport costs. According to the Reuters poll, Qatar's inflation is projected at 3.2% and the UAE's at 2.9% in 2026, reflecting the stabilizing effects of U.S. dollar pegs and government subsidies.

"The biggest risk isn't necessarily another major escalation," said Akanksha Samdani, Lead Economist at Oxford Economics. "It's whether businesses permanently price in a higher geopolitical risk premium."

A sustained increase in geopolitical risk premiums could influence pricing across oil futures, GCC sovereign debt and regional currency markets through the remainder of the year.

Sources: Reuters Poll (July 7–16, 2026), Oxford Economics, Bank Audi, Fitch Solutions.