Impact of the Iran war on GCC economies

In response to the US-Iran war, we’ve downgraded our forecast for GCC real GDP growth by 1.8ppts to 2.6% for 2026 due to lower oil production exports, tourism, and domestic demand.

• The UAE and Qatar drag growth down the most due to their inability to reroute hydrocarbon exports, leading to reduced flows and production.
• We anticipate trade and domestic activity will gradually recover starting in H2 2026. With stronger catch-up growth expected next year, we have raised our 2027 forecast by 1ppt.
• The war will damage tourism – a major non-energy contributor to regional growth – substantially this year. The sector’s recovery will hinge on post-conflict security levels.
• Our CPI inflation forecasts are slightly higher this year, but lower next year. Disruption to the Strait of Hormuz will impact not only exports but also imports of goods, leading to some shortages and higher costs associated with rerouting.
• We’ve downgraded household consumption growth across the region as a combination of work from home orders and reduced consumer confidence will reduce spending. The luxury goods sector and services will likely be the biggest losers.