The World Bank projects that output across the Middle East, North Africa, Afghanistan, and Pakistan will contract by 2.1% in 2026, reversing 3.3% growth in 2025, as the conflict that began in February 2026 disrupts energy exports, tourism, aviation and logistics. Unlike previous energy shocks, the closure of the Strait of Hormuz is imposing the largest costs on oil-exporting Gulf countries, with Gulf Cooperation Council economies expected to contract by an average of 4.3%. Oil-importing economies are proving more resilient, with growth forecast to rise to 4.3% from 3.9%. Shipping disruption is also raising food import costs and inflation, while fragile and conflict-affected economies face worsening longstanding vulnerabilities. If the conflict subsides by the end of 2026, growth excluding Iran could rebound to 7.8% in 2027 as hydrocarbon production and exports recover. Damaged infrastructure, delayed investment and depleted fiscal buffers could nevertheless constrain the recovery. Over the longer term, artificial intelligence could augment productivity in 13% to 20% of regional jobs, while fewer than 10% face near-term automation risk. Capturing those gains will require greater representation of regional languages and data in AI systems, wider adoption, investment in skills and infrastructure, and stronger private sector dynamism. The report identifies scope for regional collaboration, including knowledge sharing by Saudi Arabia and the United Arab Emirates and the use of affordable, purpose-built AI tools in more vulnerable economies.

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