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 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. 
 

Arab countries could suffer staggering losses of up to $200 billion due to the Iran conflict, according to a new United Nations study.  

The US-Israel war against Iran could cost Arab states between $120 billion to $194 billion in economic losses, new estimates by the United Nations Development Programme (UNDP) suggest.

Military escalation could wipe out between 3.7%-6% of the region’s collective gross domestic product (GDP). Coupled with an estimated loss of 3.6 million jobs - exceeding the ones created in the region last year - the reversal will cast up to 4 million people into poverty. 

The body said that it conducted five simulation scenarios, representing escalating levels of conflicts. The GCC countries and Levant subregions are expected to bear the brunt of the largest macroeconomic losses, with potential economic contractions of up to 8.5% and 8.7%, respectively. 

The crisis is expected to exacerbate poverty in the Levant region by 5%, edging an additional 2.85-3.30 million people into poverty - accounting for over 75 percent of the rise in poverty across the region. 

“This crisis rings alarm bells for countries of the region to fundamentally reevaluate their strategic choices of fiscal, sectoral, and social policies,” said Abdallah Al Dardari, UN assistant secretary general and regional bureau director for Arab States at UNDP. 

“Our findings underline the pressing need to strengthen regional collaboration to diversify economies - beyond reliance on growth driven by hydrocarbons, and to expand production bases, secure trade and logistics systems.” 

Qatar and Kuwait could witness a 14% contraction in their national outputs this year should the conflict continue through to the end of April, Bloomberg reported Goldman Sachs Group economist Farouk Soussa, as saying. 

It is a stark downside from International Monetary Fund’s growth estimates for both countries in the run-up to the conflict. The agency projected Qatar’s GDP to grow by 6.1% in 2026 and Kuwait’s economy to expand by 3.8% this year.  

The conflict, now in its fifth week, has caused considerable damage to Iranian civilian and military architecture caused by the joint US-Israeli onslaught. The attacks also wiped out its top Iranian security and political echelons. 

Iran has carried out retaliatory attacks on its Gulf neighbours, causing substantial damage to airports, hotels, technology, and energy infrastructure as well as military bases. 

The repercussions are visible in global energy markets, with the crisis helping push Brent crude prices from roughly $72 per barrel to nearly $120 before easing slightly. 

The regional aviation industry has also felt the heat, with depressed travel demand and a lingering unease among travellers. 

“Since the escalation at end February 2026, the regional aviation network has shifted from an integrated commercial system to a set of restricted corridors, with several countries implementing partial or full airspace closures. As a result, global air cargo capacity on routes linking Asia, the Middle East, and Europe declined by nearly 40% between February 28 and March 3,” the study added. 
 

Turkey’s Turkcell has secured a $1 billion Shariah-compliant syndicated Murabaha financing facility to support its 5G rollout and digital infrastructure investments, the company said.

The facility was initially launched at $500 million but was increased to $1 billion after attracting strong demand from international lenders, with subscriptions exceeding the original target by around 2.4 times.

The seven-year facility carries a profit rate of secured overnight financing rate (SOFR) plus 1.95%, with a total cost of SOFR plus 2.14% including fees, and includes a two-year grace period on principal repayments.

HSBC acted as the sole coordinator and bookrunner for the transaction. Mandated lead arrangers included Kuwait Finance House, BNP Paribas, Dubai Islamic Bank, Emirates NBD, Gulf Bank, ICBC and QNB.

Turkcell said the proceeds will be used to fund investments in 5G technology, connectivity infrastructure and digital services as Turkey prepares to launch 5G services.

Separately, Turkcell has signed a memorandum of understanding with Mavenir to introduce AI-enabled voice and messaging services on its network. The collaboration will use cloud-based infrastructure to integrate artificial intelligence capabilities into core telecom services.

Iran has said that it will target American and Israeli economic centres and financial institutions in retaliation to an attack on an Iranian bank a day earlier. 

A spokesperson for Khatam-al-Anbiya military command headquarters, said that “the enemy left our hands open to target economic centres and banks belonging to the United States and the Zionist regime in the region,” according to semi-official Tasnim News Agency. 

“The people of the region should not be within a one-kilometre radius of banks,” the spokesperson added. 

Bank Sepah, one of Iran's largest public lenders, came under attack when one of its Tehran-based branches was hit by a missile attack in the late hours of Wednesday night. 

Iran has also issued a list of major American tech giants with regional operations as ‘legitimate targets' for further attacks. 

The list includes offices and assets of tech colossi including those associated with Google, Amazon, Microsoft, Nvidia, IBM, Oracle and Palantir in Israel and around the region.

“With the expansion of the regional war into an infrastructure war, the scope of Iran’s legitimate targets gradually becomes broader,” the post read.

The Middle East has become a hotbed for global tech companies looking to build substantial local presence and ride the region's tech wave. Dubai has become an increasingly preferred destination for tech companies to advance the emirate's ambition of pushing deeper across diverse industries, including technology.

Microsoft operates a major office in Abu Dhabi while Dubai hosts regional headquarters for tech titans, including Meta and Google. 

American hyperscalers and tech giants including OpenAI, Oracle, NVIDIA have bet big on the GCC region, partaking in launching infrastructure and initiatives including Stargate, the next-gen AI infrastructure cluster within the 5-gigawatt UAE-US AI Campus, to serve companies operating within 2,000 miles of the UAE's border. 

However, the region’s digital infrastructure has been increasing susceptible to Iranian attacks in recent days. Three AWS data centres in the UAE and Bahrain sustained drone attacks last week, prompting digital banking and connectivity outages that lasted several days. 

The GCC data center market holds immense potential, looking to double from $3.48 billion in 2024 to $9.49 billion by 2030, fuelled by cloud computing, AI demand, and 2030 initiatives in Saudi Arabia and UAE.

The blockage of the Strait of Hormuz in response to escalating military conflict following US and Israeli air strikes on Iran, is expected to weaken credit quality across Middle East's vital sectors. 

Several areas of activities, including trade and supply routes, energy and capital flow and tourism are expected to come under strain, according to a study published by S&P Global Ratings. 

Oil prices have surged in the wake of the crisis, with Brent crude oil prices having climbed 11% over the past five days, and nearly 30% since the beginning of the year. 

While higher oil prices are expected to bring some short-term relief to GCC government budgets, it is contingent on whether those barrels can be exported. 

“The extent of obstructions to key trade routes or to production have the potential to induce fiscal strain through weakened revenues, which could be particularly relevant for governments with weaker balance sheets, larger banking systems and limited export options,” the credit rating agency added. 

Oman, the UAE, and Saudi Arabia can partially mitigate the impact through alternative export routes for part of their volumes. Despite alternate routes, Qatar relies on the strait as does Jordan, witj 40% of its exports heading to the Middle East, scaling their exposure to regional trade disruption. Meanwhile, Kuwait is highly reliant on the Strait as an export route, according to S&P. 

The Strait of Hormuz, one of the world’s most strategically vital chokepoints, is a narrow waterway that connects the Persian Gulf and the Gulf of Oman to the Indian Ocean for maritime traffic. Approximately a fifth of the world’s oil passes through the waterway, which is roughly 30 miles wide at its narrowest point.

The conflict has escalated the risk of capital outflows for regional financial institutions, and while the duration of hostilities will determine the volume of the outflows, Bahraini and the Qatari banking systems have the largest net external debt position and may require external or government support.

“We classify four out of the six GCC governments as highly supportive of their private-sector commercial banks. in the unlikely event of a banking crisis, there is a high likelihood of extraordinary government support to these banks,” S&P said in a February report.  

However, the conflict could last for weeks, according to US President Donald Trump. The barrage of Iranian drones and missile strikes have targeted military instalments and well as key digital infrastructure, including three AWS data centres in the UAE and Bahrain, leading to multiple digital services outages. 

Customers in the UAE have faced mobile banking outages as the toll of the protracted crisis widens to impact local lenders. 

Capital markets across the region fell on their first day of trading since the conflict broke out. Saudi’s Tadawul All Share Index plunged between 4.8% at the open on Sunday. Dubai Financial Market fell 4.7% on Wednesday, its first day of trading, while Abu Dhabi Securities Exchange plunged 1.9%, with lenders, property firms and utilities leading the losses. 
 

UAE-based carriers Emirates and Etihad Airways have resumed limited operations as airlines seek to ease some congestion caused by airspace closures enforced by ongoing Iranian attacks. 

Dubai-based Emirates said it will resume a limited number of flights from the evening of March 2, prioritizing customers with earlier bookings. Etihad resumed flights from Monday, March 2, according to the airline’s website and Flightradar24 data. 

Emirates had said that all flights to and from Dubai remain suspended until 3pm local time on March 3, while Etihad Airways temporarily ceased operations until 2pm local time Tuesday.

Qatar Airways has also suspended operations due to closure of Qatari airspace, with a further update expected by 9am Doha time on March 4. 

Oman Air has announced that all flights to and from Amman, Dubai, Bahrain, Doha, Damman, Kuwait, Copenhagen, Baghdad and Khasab between March 4 to 6 have been cancelled. Barring the aforementioned flights, all other flights will operate as scheduled, though the carrier did warn of some possible delays. 

Airspace closures by GCC countries amid ongoing Iranian attacks were the most severe in recent times, leaving tens of thousands of travellers stranded in places such as Dubai and Doha.

Iran’s attack on Gulf countries has entered its third day, making flying a precarious pursuit, compounded further by the fog of war which has led to the inadvertent downing of US fighter jets in Kuwait. 

The UAE’s Civil Aviation Authority said that more than 20,000 affected passengers were supported through temporary accommodation arrangements and rebooking services. Dubai Airports, the authority that manages Dubai International (DXB) and Dubai World Central (DWC), confirmed that limited operations will resume Monday, permitting a select number of flights to operate from both facilities. 

Since the beginning of the conflict, flight cancellations across seven Middle Eastern airports -including Dubai's DXB and DWC, Abu Dhabi's Zayed International Airport, Doha's Hamad International Airport, Bahrain International Airport, Sharjah International Airport and Kuwait International Airport - have exceeded 12,300 in number, according to Flightradar24. 

More than 100,000 Britons have registered their presence in the Middle East with the UK government, part of around 300,000 people who are currently present across Gulf countries, including residents, holidaymakers and those transiting through.  

Aviation infrastructure across the Gulf region has come under siege with Iranian missiles and drones attacking critical architecture. DXB’s concourse took a minor hit with four people sustaining injuries. A drone attack struck Kuwait International Airport, leaving multiple people with minor injuries and causing damage to Terminal 1.

In an interview with CNN, the Qatari foreign ministry ‌spokesperson said that country intercepted Iranian attacks that targeted ⁠civilian infrastructure, ⁠including the international airport. 

Airlines around the world, from the UK and France to North America and Asia have axed flights to the Middle East amid mounting regional tensions.

Lufthansa suspended flights to Dubai until March 4 and to other cities including Tel Aviv, Beirut, Tehran and Amman, until March 8. British Airways halted flights to the Gulf, Israel and Jordan through mid-March while North American carriers, including Delta and United, have all paused Middle East operations. Air Canada has suspended all flights to and from Dubai and Tel Aviv until March 23.

Stock markets across the Gulf region opened to a jittery start on Sunday in first signs that the Iran-US conflict has impacted regional financial markets. 

Saudi’s Tadawul All Share Index (TASI) plunged roughly 4.8% at the open on Sunday, hitting a 35-month low before paring more than half of its loss, closing 2.18% lower. 

The benchmark index of Muscat Exchange fell 103.18 points from its previous day's close of 7393.37, amid a regional sell-off triggered by mounting tensions. 

Boursa Kuwait suspended trading on Sunday, citing exceptional circumstances. 

“Based on the decision of the Board of Commissioners of the Capital Markets Authority, and due to the exceptional circumstances, the country is currently experiencing Boursa Kuwait announces the suspension of trading effective 01-03-2026, until further notice,” a notice on Boursa Kuwait’s website read. 

The UAE’s financial regulatory authority also announced the closure of both its bourses - Abu Dhabi Securities Exchange and Dubai Financial Market – on March 2 and 3. The country has faced a barrage of drone and missile attacks over the weekend. 

The UAE Capital Markets Authority said that it would continue to assess the situation on an ongoing basis, taking any further measures as necessary.

Brent crude prices surged from Friday's close of $72.48 a barrel to $78.36 a barrel on Sunday, with the overall price having risen 16% over the past month. 

Felipe Elink Schuurman, CEO and co-founder at Sparta Commodities said that a softer oil price hike than the one anticipated over the weekend indicates a mere logistical disruption, not a supply one. 

“It is indeed surprising that most polls over the weekend were expecting a rise in flat price of $80 to $90 (a barrel]. It started off [Monday] morning at $81 but then it came down,” Schuurman said during a Gulf Intelligence podcast,. 

“For the time being, there is a sort of de facto closure of the Strait of Hormuz, mostly because of insurance companies putting in barriers or increasing their insurance coverage or trading companies not willing to take their vehicles through the Strait. So, it basically means that it is a logistical disruption but we have not yet seen any kind of supply disruption.” 

The Strait of Hormuz, one of the world’s most strategically vital chokepoints, is a narrow waterway that connects the Persian Gulf and the Gulf of Oman to the Indian Ocean for maritime traffic. Roughly 30 miles wide at its narrowest point, oil tankers carry approximately 20 million barrels of oil each day through the Strait.

“Oil markets have been the most visible expression of markets pricing in geopolitical conditions with Brent opening 12.5% higher,” wrote Edward Bell, acting group head of research and chief economist at Emirates NBD.

“Markets have since pared those moves as there is a renewed focus on diplomatic avenues but in the meantime, oil will be highly subject to headlines and in particular, the status of the Strait of Hormuz.”

Saudi Arabia’s budget deficit in the fourth quarter grew to its highest in five years, as reduced oil prices continue to weigh on state revenues. 

The kingdom's fourth quarter budget deficit rose to $25.3 billion (94.9 billion Saudi riyals) from $23.6 billion (88.5 billion Saudi riyals) recorded during the previous quarter and $15.3 billion (57.6 billion Saudi riyals) posted in the fourth quarter of 2024. 

The budget deficit brought the year’s total shortfall to $73.6 billion (276 billion Saudi riyals), which Riyadh has entirely funded through borrowing.  

Fourth quarter revenues slid to $41 billion (154 billion Saudi riyals) from $45.6 billion (171 billion Saudi riyals) recorded during a year-earlier period.

Oil and non-oil revenues rose over the previous quarter but dipped on an annual basis. Oil revenues slid 10% year-on-year to $41.1 billion (154.2 billion riyals) in the fourth quarter of 2025, alongside non-oil revenues which fell 7% to $32.7 billion (122.6 billion Saudi riyals).

Expenditures rose a nominal 3% over the previous year, with compensation to employees constituting up two-fifth, according to data shared by the Ministry of Finance.

“With oil prices well below the estimated fiscal breakeven level, Saudi Arabia has ramped up borrowing in international debt markets and diversified its funding sources, while also reassessing the pace and scale of major Vision 2030 projects to prioritize efficiency and private sector participation,” the MUFG report read.  

“While officials expect the deficit narrow to 3.3% of GDP this year, investors anticipate it will remain higher, reflecting persistent spending pressures and a challenging oil revenue environment.”  

The kingdom has been running budget deficits since 2022, as reduced oil revenues strain public finances. Brent crude, which serves as a benchmark for roughly two-thirds of the world's crude oil supplies, is hovering around $71 per against the backdrop of a substantial American military buildup in the Middle East. 

Saudi Arabia needs oil to be north of $92 per barrel this year and at $86.6 per barrel in 2026 to balance its books, according to the IMF.