The economies of Gulf countries continue to suffer uneven impacts six months after the start of the war with Iran and the disruption in the Strait of Hormuz, according to an analysis by Morningstar DBRS. Kuwait, Qatar and Bahrain are among the most affected and are expected to record sharp slowdowns or declines in real GDP growth in 2026. Conversely, the United Arab Emirates, Saudi Arabia and Oman have resisted better, partly due to their lower dependence on the Strait of Hormuz for their exports.
The Memorandum of Understanding between the United States and Iran, which extended the ceasefire agreed in April for another 60 days, ended on 17 August without a new extension agreement. Hostilities have resumed and Washington announced new sanctions against Tehran. Uncertainty remains high due to the absence of a solution to the conflict in the Middle East.
Oil production has increased in Gulf-producing countries, helping to offset some of the effects of the disruption to trade routes, and support measures and domestic spending have helped cushion the economic impact. Nevertheless, exports remain below pre-conflict levels in most economies of the region. The recovery in tourism is a positive signal, but forecasts point to a significant slowdown in growth in some GCC countries.
DBRS considers the risks to the economic outlook to remain high, namely due to the possibility of further escalation of the conflict. Another identified risk is the potential closure of the Bab el-Mandeb Strait, in the Red Sea. According to Adriana Alvarado, Senior Vice President of the Global Sovereign Ratings Group, Gulf economies are expected to continue suffering uneven impacts until a full and lasting reopening of the Strait of Hormuz is agreed.
