Middle East Economies Face Deep Contraction Amid Strait of Hormuz Closure

Gulf Cooperation Council economies bear the brunt of the instability, with a projected 4.3% decline in output. While oil exporters traditionally hedge against market volatility, the physical inability to move cargo has transformed an energy shock into a systemic export crisis. Conversely, oil-importing nations show surprising resilience, with growth forecasts climbing to 4.3% as their economic structures prove less reliant on the shuttered maritime chokepoints.

Beyond energy, the fallout is reshaping regional logistics, aviation, and tourism. Inflationary pressures are mounting as supply chain disruptions elevate the cost of essential goods, further squeezing households in already fragile economies. Ousmane Dione, the World Bank’s Vice President for the region, warns that without immediate investment in resilient infrastructure, the damage to living standards and human capital could persist long after the conflict ends.

Looking toward a potential 2027 recovery, the World Bank identifies artificial intelligence as a critical lever for future productivity. With fewer than 10% of jobs currently at risk of automation, there is significant room to integrate AI tools. Roberta Gatti, the organization's Chief Economist for the region, suggests that bridging the gap between Gulf computing capacity and the talent pools of middle-income neighbors could create a unique regional ecosystem. Success hinges on addressing the current scarcity of local-language data and the digital divide that prevents smaller economies from adopting specialized, task-oriented AI solutions.