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The World Bank said the wider Middle East, North Africa, Afghanistan, and Pakistan region is expected to contract 2.1% this year, following growth of 3.3% in 2025. If the conflict subsides by the end of 2026, growth across MENAAP excluding Iran could rebound to 7.8% in 2027, driven largely by the recovery in hydrocarbon production and exports.

The Gulf numbers, however, mask major differences between individual economies.

Qatar is expected to record the strongest expansion, with GDP forecast to grow 26.7% in 2027 as liquefied natural gas production resumes. Kuwait is projected to expand 22% as oil exports normalise, while the UAE is forecast to grow 9.5%.

Saudi Arabia, the region’s largest economy, is expected to contract 2% in 2026 before rebounding 7.9% next year. Bahrain and Oman are forecast to grow 4.2% and 3.4%, respectively.

The sharp variation indicates how disruptions to energy production and exports have impacted individual economies. For instance, Qatar’s forecast reflects the anticipated restart and ramp-up of LNG production, while Kuwait’s outlook closely ties to the restoration of oil shipments.

Saudi Arabia has been relatively better positioned than some of its neighbours because the East-West pipeline provides an alternative route for crude exports to Yanbu on the Red Sea, reducing its dependence on Hormuz.

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The scale of the potential rebound is also a reminder that the Gulf’s diversification drive, while significant, has not removed the importance of hydrocarbons to economic growth.

The World Bank said the conflict has caused losses not only through reduced oil exports but also through weaker tourism, aviation, and logistics activity. Higher shipping costs have pushed up import prices, adding inflationary pressure across the region and straining supply chains.

Oil flows have already begun to recover, although they remain well below pre-conflict levels. Gulf exports excluding Iran averaged about 19.2 million barrels a day in September, or more than 81% of the pre-war level, according to Vortexa data reported by Reuters. Crude and condensate exports had recovered to about 91% of pre-war levels, while refined-fuel exports remained significantly weaker.

That distinction matters because restoring crude exports alone will not immediately resolve the disruption facing global energy markets. Damage to refineries and infrastructure has left refined products, particularly diesel and jet fuel, in much tighter supply.

The International Energy Agency has warned that the disruption could continue to weigh on the global oil supply until 2027. It expects the world oil supply to fall sharply in 2026, while demand is forecast to rebound in 2027 as energy markets stabilise.

For Gulf policymakers, the challenge will be converting a hydrocarbon-led rebound into more durable non-oil growth.

The IMF has similarly warned that the recovery depends on a gradual normalisation of shipping. It says GCC economies have shown resilience through fiscal and external buffers, strong banking systems, and investments in energy and logistics infrastructure.

But a prolonged conflict could delay the recovery, weaken investor sentiment, and make diversification and job creation harder.

Saudi Arabia and the UAE are particularly important to that diversification story. Construction, logistics, tourism, hospitality, financial services, and business services are expected to benefit as regional trade and investment recover.

Saudi Arabia’s Vision 2030 projects are likely to provide additional support to activity even as oil production rebounds.

The World Bank also sees artificial intelligence as a potential longer-term growth engine. It estimates that between 13% and 20% of jobs in the wider MENAAP region have significant potential to benefit from AI-driven productivity gains. Saudi Arabia and the UAE, with their growing computing capacity and investment in AI, are positioned to play a leading role.

Still, the 10.3% forecast should be viewed as a conditional recovery rather than a guaranteed boom. The World Bank cautioned that damaged infrastructure, postponed investment, and depleted fiscal buffers could continue to weigh on economies even after the immediate conflict ends.

For investors, the central question is therefore whether the 2027 rebound will simply reflect the restoration of oil production or become the beginning of a broader recovery in private investment and non-hydrocarbon activity.

If oil and shipping flows normalise, the Gulf could move from its sharpest downturn in years to one of its strongest expansions in a single year. But the sustainability of that rebound will ultimately depend on whether higher hydrocarbon revenues translate into productivity, private-sector investment, and deeper economic diversification.