The World Bank has lowered its economic growth forecasts for multiple regions, warning that the war in the Middle East is taking an immediate toll on surrounding economies, with Gulf countries expected to suffer the sharpest slowdown.
In its latest regional economic updates, the World Bank said on Wednesday the closure of the Strait of Hormuz and the destruction of energy and public infrastructure have disrupted markets, heightened financial volatility and weakened the 2026 outlook across several regions.
It said the Middle East, North Africa, Afghanistan and Pakistan regions were hit particularly hard, describing the war as an additional shock to economies already struggling with low productivity growth, weak private sector dynamism and persistent labor market challenges.
Excluding Iran, overall growth in the region is projected to slow from 4% in 2025 to 1.8% in 2026, a downgrade of 2.4 percentage points from the World Bank’s January forecast.
The sharpest deterioration is expected in Gulf Cooperation Council economies and Iraq, which are heavily exposed to the war. Growth in GCC countries was downgraded 3.1 percentage points from January projections and is forecast to slow from 4.4 percent in 2025 to 1.3 percent in 2026.
The World Bank warned that risks remain tilted to the downside, saying a prolonged conflict could further lift energy and food prices, reduce trade, tourism and remittance flows, increase fiscal pressures and trigger more displacement.