A Reversal of Fortunes: Inside the World Bank's October Reading of the Hormuz Shock, the 2027 Rebound and the Region's AI Opening

Report summary

For half a century, when energy prices surged, the Gulf gained. The surge of 2026 is taxing it instead. That inversion is the central finding of the World Bank Group's October 2026 economic update for the Middle East, North Africa, Afghanistan and Pakistan region, published on 6 October under the title From Divide to Opportunity: AI, Jobs, and Growth, and it follows from a single mechanism: the binding constraint of this shock is volume, not price. The effective closure of the Strait of Hormuz, a corridor that normally carries around one fifth of globally traded oil and liquefied natural gas, cut Gulf oil production from about 26 million barrels per day before the conflict to about 16 million in March, so higher prices arrived precisely when several exporters had fewer barrels to sell. Regional output is now projected to contract by 2.1 percent in 2026 after growing 3.3 percent in 2025, with the Gulf Cooperation Council economies contracting 4.3 percent on average, 5.7 percentage points below the Bank's April vintage and 8.7 below January, a contraction the update compares to the pandemic year. The losses track the Bank's own measure of exposure: each economy's reliance on the strait as its sole export corridor, interacting with infrastructure, production flexibility and the buffers each sovereign brought into the year. Economies with few near term alternatives to the strait carry the heaviest projections: Qatar at a contraction of 20.9 percent, its weakest performance in more than five decades, Kuwait at 14.6 percent, its weakest in more than three, Iraq at 12.4 percent and Bahrain at 2.9 percent.