Just three tankers crossed the Strait of Hormuz in the seven-day moving average ending September 27, according to the IMF's PortWatch monitor. That figure sits at the heart of the World Bank's latest downgrade: the Middle East's economy will contract by 2.1 per cent this year as the Iran war cuts off the region's energy lifeline.
The bank's Economic Update for the Middle East, North Africa, Afghanistan and Pakistan (Menaap) sets out the damage in blunt numbers. Economists had already lowered the 2026 forecast from 3.6 per cent in January to 2.1 per cent in April. The seven-month conflict began on February 28, and the strait's closure initially blocked much of the region's energy supplies, hurt tourism, aviation and logistics, and added uncertainty in financial markets, the bank said.
The Strait and the Gulf
The Gulf took the heaviest hit. Gulf oil production dropped from a prewar average of 26 million barrels a day to about 16 million in March. Gulf Co-operation Council economies are projected to contract by an average of 4.3 per cent in 2026, a 5.7 percentage-point reduction from April, as lower export volumes cut output and government revenue.
The UAE and Saudi Arabia grew 4.6 per cent and 6.2 per cent respectively in 2025. Now, the bank forecasts they will shrink by 1.6 per cent and 2.0 per cent. Kuwait faces a projected 14.6 per cent contraction. Qatar's figures are starker still: after 1.8 per cent growth in 2025, it faces a 20.9 per cent contraction, its weakest performance in five decades. Damage at its sites drove average monthly gas production down by about 67 per cent between March and July.
Iran isn't spared. Its economy is expected to shrink by 7.7 per cent in 2026. Iraq, Opec's second-largest producer, depends on oil for about 90 per cent of government revenue and is projected to contract by 12.4 per cent.
"This conflict is very painful and it has concentrated the losses of the conflict in our region while the global economy and other regions are upgrading their forecasts, and we are downgrading significantly," said Roberta Gatti, Menaap chief economist at the World Bank. "It's a volume story. It's a quantity story for us. It's a price story for the world."
Workarounds and Winners
Gulf states have rushed to find routes around the chokepoint. The UAE has pursued a "Zero Hormuz" strategy to diversify supply chains. Saudi Arabia has used its East-West Pipeline to carry oil to Yanbu Port on the Red Sea. The Abu Dhabi Crude Oil Pipeline can carry the emirate's onshore crude from Habshan to a terminal and export port in Fujairah, bypassing the strait entirely.
Saudi Aramco chief Amin Nasser said the East-West Pipeline kept oil prices at about $100 a barrel. Speaking at an energy conference in London on Monday, he warned that refilling global inventories depleted under emergency measures could take up to two years. Brent crude traded at about $118 a barrel in March and May.
Oman relies less on the strait and is the only GCC member projected to grow this year, at 3.1 per cent. Oil importers fare better in what Gatti called a "reversal of fortunes" compared with the energy shock four years ago after Russia's invasion of Ukraine. Egypt is expected to grow 5.1 per cent, Morocco 4.4 per cent and Pakistan 3.7 per cent.
Conflict Zones Pay Twice
Gatti said the Iran war compounds problems in economies already scarred by conflict. Renewed hostilities between Israel and Hezbollah are reversing Lebanon's recovery: after 4.2 per cent growth in 2025, the country faces a projected 6.4 per cent contraction this year.
In the West Bank and Gaza, growth is projected to slow from 4.3 per cent in 2025 to 1.5 per cent, a downward revision of 3 percentage points from April. The poverty rate remains an estimated 41.9 per cent. Gaza's economy remains in "near-total collapse" despite the October 2025 ceasefire, now one year old, the report said, citing flare-ups in tensions, continued restrictions and stalled reconstruction.
"There were ongoing fragilities and now we see less humanitarian aid. We see a need to keep the attention," Gatti said. She said reduced aid adds to the economic costs of fragility; continued attention and investment matter if the region is to prevent consequences from reaching future generations.
The Rebound Assumption
The forecast rests on one hinge: the report assumes the strait will gradually reopen beginning December 31. Under that scenario, 2027 activity rebounds by 8 per cent in the UAE, 6.1 per cent in Saudi Arabia, 25 per cent in Qatar and 20.5 per cent in Kuwait. The GCC as a whole would grow by 8.6 per cent.
The bank also pointed to artificial intelligence as an opportunity, saying it could boost productivity in up to 20 per cent of regional jobs. "Some of the complements that are needed to fit the benefits of AI might not require money, but they require political will and vision," Gatti said.
Why This Matters: The World Bank's numbers show what a single hostile state can do to an entire region's economy by threatening one waterway. Iran's closure of the Strait of Hormuz has cut Gulf output, drained government revenues and pushed even Iran's own economy into a 7.7 per cent contraction. The recovery forecast depends entirely on the strait reopening, an outcome the report assumes, not guarantees. For Gulf states, pipeline bypasses offer partial insulation, but they also show how exposed the region remains to Tehran's leverage. Fragile economies from Lebanon to Gaza take the secondary damage, as reconstruction stalls and aid shrinks. That's the strategic cost when a regional power treats global energy chokepoints as instruments of coercion.