Economic growth across the GCC is set for a significant slowdown this year, with analysts slashing GDP forecasts by 1.8 percentage points to 2.6 per cent.
The downgrade follows intensifying regional conflict that has effectively shuttered the Strait of Hormuz, according to the latest research briefing from Oxford Economics.
The report warns that the effective closure of the crucial waterway – through which approximately 20 per cent of global oil supply flows – has halted hydrocarbon exports from Bahrain, Kuwait, and Qatar.
While Saudi Arabia and the UAE can partially reroute supplies via pipelines, logistical constraints remain a major hurdle.
Bahrain’s real GDP growth forecast for 2026 has been revised downwards by 1.1 percentage points. The kingdom, alongside Kuwait, faces a challenging period marked by dips in oil exports and a substantial hit to the tourism sector.
“Their proximities and the more serious attacks that they’ve faced are also likely to lead to greater caution and lower consumer confidence compared to other GCC members,” said Oxford Economics head of GCC Macroeconomic Analysis Azad Zangana.
Furthermore, Bahrain has seen a notable increase in its Credit Default Swap (CDS) spreads as financial conditions tighten across the region.
Qatar and UAE are expected to drag regional growth down the most. Qatar’s GDP forecast has been slashed by 7.25 percentage points due to its high reliance on gas exports and the suspension of production at its North Field East facility.
The UAE follows with a 3.2 percentage point downgrade, reflecting its limited shipping alternatives and high exposure to the travel sector.
Passenger arrivals in the GCC are projected to decline by 11 per cent this year.
Airspace closures above Bahrain, Kuwait, and Qatar have stranded travellers and interrupted transiting flights.
Regional CPI inflation is forecast to rise by 0.2 percentage points to 2.5pc as import disruptions lead to shortages of non-essential goods.
Household consumption growth has also been downgraded by 1.5 percentage points as consumer confidence wanes.
Regional bourses have reacted sharply, with the Dubai Financial Market General Index falling 11.5pc since the start of the conflict.
The Qatar Exchange and Abu Dhabi General Index have lost 5.8pc and 5.7pc, respectively.
Despite the near-term shock, analysts anticipate a gradual recovery in trade and domestic activity starting in the second half of 2026. “The region’s structural investment case is strong enough to warrant a swift recovery,” Mr Zangana noted, raising the 2027 GCC growth forecast by 1 percentage point.
Oman is expected to see the smallest negative impact, as it operates exports from outside the Strait of Hormuz and maintains open airspace.
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