Economic Impact of the Iran War on Arab Countries — April 2026

Report summary

This report provides a structured assessment of the macroeconomic impact of recent geopolitical tensions on Arab economies, with a focus on inflation dynamics, growth trajectories, and cross-country divergence. The central conclusion is clear: the current geopolitical shock is not a conventional oil cycle, but a multi-channel economic disruption affecting trade flows, energy supply chains, financial conditions, and investor confidence simultaneously. The transmission mechanisms include higher shipping and insurance costs, supply chain disruptions, capital outflows, and increased uncertainty across global markets. Even under a contained scenario, global conditions are tightening. Recent projections indicate global growth moderating to approximately 3.1% in 2026, while global inflation remains elevated near 4.4%, reflecting persistent supply-side pressures and geopolitical risk premiums. Across the broader MENA region, growth is estimated to slow sharply, with regional expansion declining toward ~1.8% in 2026, representing a significant downgrade from earlier expectations. Within the Arab world, the impact is highly uneven, leading to clear divergence in both inflation and growth outcomes. On inflation, the data shows a wide dispersion. Egypt records the highest projected inflation at 13.2%, followed by Tunisia at 6.5% and Mauritania at 4.1%, reflecting strong exposure to currency pressures and imported inflation. In contrast, Gulf economies maintain relatively contained inflation, generally within the 2.3% to 2.8% range, supported by currency stability, fiscal buffers, and policy intervention. However, upward revisions across several economies, including Bahrain (+1.6pp), Qatar (+1.3pp), and Kuwait (+0.6pp), indicate increasing sensitivity to global inflationary pressures.