Growth across the Middle East and North Africa region has bore the biggest brunt of the Iran conflict, significantly eroding regional output and progress. 

The MENA region’s growth is expected to slow down to 1.1% in 2026, from 3.2% last year, before recovering to 4.8% in 2027, as the region faces the most direct impact of the current war, the International Monetary Fund (IMF) has estimated. The region's 2026 growth forecast has been lowered by 2.8 percentage points from the fund's January projections. 

For commodity exporters directly affected by the conflict, diminished production and exports imply a severe downward revision of GDP growth projections for 2026, the fund said in its latest World Economic Output (WEO) update released this week. 

“The contraction of GDP growth for 2026 is therefore more pronounced for Bahrain, Iran, Iraq, Kuwait, and Qatar and less significant for Oman, Saudi Arabia, and the United Arab Emirates," the IMF said in its report. 

"For all these economies, growth in 2027 is expected to rebound, based on the assumption that energy production and transportation are normalized over the next few months - an assumption that may need to be revised if the duration of the conflict extends and the degree of damage suffered gets reassessed.”

The fund lowered estimates for Saudi Arabia’s GDP forecast for 2026 by 1.4 percentage point relative to January, to 3.1%, while revising it upward by 0.9 percentage point, to 4.5% for 2027.

Iran is among the worst hit countries in terms of downward growth revision, with its economy revised downward by 7.2 percentage points compared to IMF's January estimate, to -6.1% before rising sharply to 3.2% in 2027. 

In Egypt, growth is projected to slow to 4.2% in 2026 and recover to 4.8% in 2027, a cumulative downward revision of 1.1 percentage points.

"For commodity importers in the MENA, the terms-of-trade shock from higher commodity prices contributes to a somewhat modest downward revision of growth projections in 2026 and 2027, with some differentiation as a result of varying exposures to imports of energy, energy derivatives, and food items, as well as different economic trajectories before the conflict erupted," the report read. 

The fund has estimated global and regional growth under several operating scenarios. Under the assumption that the conflict will be relatively short-lived, global growth is expected to slow down to 3.1% in 2026 and 3.2% in 2027, down from 3.4% achieved last year. 

In case of a more protracted conflict, in which production and transport activities may take longer to resume than anticipated, the fund has taken two downside scenarios in consideration. 

In the adverse scenario - where oil prices would spike 80% and gas prices for Europe and Asia would rise 160% by the second quarter relative to the fund’s January baseline, as well as one-year-ahead inflation would soar by 50 basis points across advanced economies and 90 basis points in emerging markets by 2027 – global growth is estimated to drop to 2.5% in 2026 before rising to 3% next year. 

Global growth is estimated at 2% in 2026 and 2.2% in 2027 under a severe scenario in which oil prices would double while gas prices would rise 200% starting in the second quarter of 2026 relatively to the January WEO update baseline. Such a scenario would see one-year-ahead inflation spiking 100 basis points in advanced economies and 130 basis points in emerging markets by 2027. 

“The current hostilities in the Middle East pose immediate policy trade-offs: between fighting inflation and preserving growth and between supporting those affected by the rising cost of living and rebuilding fiscal buffers. Amid frequent global shocks, countries need to calibrate policies to ensure that they not only step up to the moment but also stand up to the next test,” the fund added. 

The European Bank for Reconstruction and Development has increased its trade finance facility to Arab Islamic Bank by an additional $5 million, bringing the total limit to $10 million to support Palestinian import and export activity.

The expanded financing, provided under the EBRD’s Trade Facilitation Programme (TFP), aims to enhance trade flows between the West Bank and international markets at a time when access to global banking services remains constrained.

“The expanded limit to AIB will facilitate further trade flows between the West Bank and international markets, enabling the issuance of trade finance instruments,” the EBRD said in a statement, highlighting the bank’s role in supporting the resilience of the local financial sector.

AIB joined the TFP in 2023 with an initial limit of $2 million, which has since been increased twice in response to the bank’s growing trade finance activity. The facility has been used to support several transactions, including the import of essential goods such as food and medical equipment.

AIB is the largest Islamic bank operating in the West Bank and Gaza and is a subsidiary of Bank of Palestine, an EBRD client since 2020. Through the programme, AIB has gained access to a global network of more than 100 issuing banks and over 800 confirming banks. Its staff have also participated in EBRD-led training and workshops on trade finance best practices.

Launched in 1999, the EBRD’s Trade Facilitation Programme supports international trade by providing guarantees and short-term financing to participating banks and factoring companies, enabling them to extend funding to local exporters, importers and distributors.

Since commencing operations in the West Bank and Gaza in 2017, the EBRD has approved 38 projects with a total investment volume of €196.5 million, underscoring its ongoing commitment to strengthening the Palestinian financial sector and facilitating economic activity.

The United Arab Emirates was among the top three investors in Türkiye at the beginning of the year. 

The Gulf state invested $95 million in the first two months of the year, behind Germany, which invested $198 million and the Netherlands that ploughed $118 million, state-run Anadolu Agency reported, citing data from the Association of International Investors. 

European Union (EU) countries accounted for 35% of inbound FDIs in February, which totalled $780 million. The UAE held the largest share by country at 18%, ahead of Singapore and the US at 15% each, Germany (14%) and Spain (9%).  

The recent injection helped drive total FDI inflows to more than $289 billion since 2003. EU countries were Turkiye’s biggest investors during the 2003-2025 period, constituting 59% of the total investor pool. 

FDI inflows to Türkiye stood at $10.4 billion in 2023, slipping from $13.4 billion received in 2022, according to UNCTAD's World Investment Report 2024.

“Türkiye’s investment climate is positively influenced by its favourable demographics and strategic geographical position, providing access to multiple regional markets, and has one of the most liberal legal regimes for FDI among OECD members,” according to Lloyds Bank. 

The country has adopted a series of legislative reforms to facilitate the reception of foreign investment, such as the creation of the Investment Office of the Presidency of the Republic of Türkiye, it added. 

Turkiye’s economy is projected to grow at 3.4% this year and 3.5% in 2027, according to the International Monetary Fund (IMF). 
The fund lowered Turkiye’s GDP forecast in its latest World Economic Outlook report, down 0.8 percentage points from its January 2026 WEO update.

The downward revision was due to weaker than expected growth in 2025, with high oil and gas prices weighing on economic activity. 
 

Egypt-based fintech Lucky has raised $23 million in a Series B funding round comprising both equity and debt, as it looks to expand its credit offerings and scale operations across North Africa, the company said in a statement.

The round included participation from Disruptech Ventures, Development Partners International (DPI) through its Nclude platform, Suez Canal Bank, and OneStop, led by investor Mohamed Farouk, who has also been appointed chairman of Lucky’s board.

The company said the new funding will be used to strengthen its credit products, invest in technology infrastructure, and support regional expansion, while preparing for regulatory developments tied to digital banking and payments.

Lucky is also working toward obtaining a payment service provider (PSP) licence, which would enable it to broaden its digital financial services offering in line with evolving regulations in Egypt.

The company’s expansion comes as Egypt advances its digital finance agenda, with regulators introducing new frameworks aimed at improving financial inclusion and enabling fintech growth.

Tourism revenues losses in the GCC resulting from the US-Israel war against Iran could range between $13 and $22 billion, the GCC secretary-general has said. 

Tourist figures are expected to plunge between 8 and 19 million due to military escalation in the region, state news agency WAM quoted Jasem Albudaiwi as saying. 

Speaking at an extraordinary meeting of the committee of the GCC Ministers of Tourism held on Tuesday, Albudaiwi said that the challenges facing Gulf nations are no longer “a passing circumstance” but rather a true test of the GCC’s ability to ensure continued efficiency and stability of its sectors. 

Data from the Gulf Statistical Centre suggests that GCC countries collectively received more than 72 million tourists in 2025, netting in nearly $120 billion in revenues. 

“The developments we are witnessing today have cast a shadow over the vital tourism sector, impacting travel patterns, the pace of tourism activity and the stability of related markets," he said. 

“[The] escalation necessitates that we all move from traditional coordination to a higher level of practical integration and proactive response, given that the tourism sector in the GCC countries is a fundamental pillar for achieving economic sustainability."

The GCC secretary-general also pointed out that experience has proven that the GCC countries are capable of overcoming all crises and challenges efficiently and effectively, relying on their close ties and effective integration across all fields.

The escalating conflict in Iran is costing the Middle East’s travel and tourism sector a minimum of $600 million per day in international visitor spending, the World Travel & Tourism Council estimated last month. 

Key regional aviation hubs including Dubai, Abu Dhabi, Doha and Bahrain, which collectively process around 526,000 passengers per day, experienced closures and operational disruption amid heightening tension and escalating conflict. 
 

Dubai’s benchmark stock index rose nearly 7%, after the US and Iran agreed on a two-week conditional ceasefire in a conflict that has had profound socio-economic impacts on the region. 

The Dubai Financial Market General Index rose 6.91% or 373 points to close at 5777.47 on Wednesday. Real estate companies, banks and airlines reported the highest gains, with Dubai’s flagship develop Emaar rising 13%. Emirates NBD, the emirate’s largest bank by assets registered 10.67% in gains while Dubai Islamic Bank rose 6%. 

The Abu Dhabi Stock Exchange also registered modest gains of 2.84% on Wednesday, giving a much-needed respite to investors. 

Energy markets welcomed the pause, with WTI crude oil futures dipping more than 15% to below $93 per barrel on Wednesday. Brent crude oil futures tumbled more than 15% toward $91 per barrel, according to the Trading Economics website. 

The ceasefire is contingent on the reopening of the Strait of Hormuz, a vital waterway which facilitates the passing of substantial amounts of oil, gas and non-energy products. 

Arab countries could suffer staggering losses of up to $200 billion due to the Iran conflict, with the military escalation potentially wiping out between 3.7%-6% of the region’s collective gross domestic product (GDP). 

Türkiye and Azerbaijan have signed a tourism cooperation protocol to explore ways of boosting tourism and enhancing collaboration within international entities. 

The 5th meeting of the Azerbaijan–Türkiye Joint Tourism Working Group, held in Antalya, focused on bilateral tourism cooperation, collaboration within international organizations and tourism education, managing coastal areas for tourism purposes, winter, health, and gastronomy tourism.

Ways of improving the legislative framework for sustainable tourism were also discussed, according to Azerbaijan’s state news agency. 

The discussions emphasized on cooperation mechanisms between the public and private sectors, managing regional tourism and cultural heritage, enhancing experience and information exchange in marketing and promotion, and drafting a joint action program for 2026.

The officials explored cooperation within the UN Tourism, the Economic Cooperation Organization (ECO), the Organization of Islamic Cooperation (OIC), D 8, and the Organization of Turkic States (OTS).

The meeting also addressed cooperation in COP31, the 31st session of the climate change conference to be held in Turkiye later this year. Azerbaijan hosted COP29 in November 2024. 

It was noted that, for the first time in COP history, tourism was included in the thematic agenda, and an agreement was reached to share Azerbaijan’s experience in this area with Türkiye.
 

Pakistan’s Securities and Exchange Commission (SECP) has approved the country’s first Shariah-compliant credit risk-sharing product, aimed at improving access to financing for micro, small and medium enterprises (MSMEs) and the agriculture sector, the regulator said on Saturday.

The product, developed by the National Credit Guarantee Company Limited (NCGCL), introduces a risk-sharing mechanism designed to reduce credit exposure for financial institutions while remaining aligned with Islamic finance principles. It offers an alternative to conventional credit guarantees, which are typically interest-based.

According to the regulator, the product, which has not yet been formally named, is structured as a Takaful-based credit guarantee built on the principle of tabarru. It has also advised NCGCL to introduce a brand identity and consider establishing an Islamic window to offer similar solutions.

The SECP’s Shariah Advisory Committee reviewed and approved the structure, confirming its compliance with key Islamic finance principles, while recommending stronger governance and documentation frameworks to support implementation.

The approval comes as Pakistan accelerates efforts to transition its financial system toward Shariah compliance, following a 2022 directive by the Federal Shariat Court to eliminate interest-based banking by 2027. Authorities have since introduced reforms, including legal amendments and the expansion of sukuk issuances to replace conventional government debt instruments.

According to the SECP, the new product is expected to support financial inclusion and responsible lending by enabling banks and financial institutions to extend financing to underserved segments of the economy.

Uzbekistan has introduced a legal framework for Islamic banking after President Shavkat Mirziyoyev signed amendments to the country’s legislation, enabling the provision of Shariah-compliant financial services and supporting the diversification of its financial sector.

The newly adopted law, titled “On Amendments and Additions to Certain Legislative Acts of Uzbekistan,” sets out the regulatory basis for Islamic banking activities, aiming to expand access to finance for individuals and businesses while attracting international investors and enhancing competition within the banking industry.

“The introduction of this framework is expected to broaden access to financial services for both the general population and the business community,” the government said, adding that the initiative is designed to strengthen the country’s financial ecosystem and support economic development.

Under the legislation, Islamic banking institutions will be permitted to offer a range of Shariah-compliant services, including profit-and-loss sharing investment deposits, client financing through agency agreements, and equity participation in businesses. The law also allows financing through credit sales of goods, advance payments for commodities, and Islamic leasing arrangements that provide clients with the option to acquire ownership of assets.

The framework stipulates that only legal entities holding a licence issued by the Central Bank of the Republic of Uzbekistan will be authorised to conduct Islamic banking activities. These licences will be granted without an expiration date and will be non-transferable, ensuring regulatory oversight and operational stability.

The law is scheduled to come into effect three months after its official publication, allowing the Central Bank and financial institutions time to prepare for the rollout of Islamic financial services. The move positions Uzbekistan among a growing number of countries seeking to integrate Islamic finance into their banking systems to support financial inclusion and attract cross-border investment.