The war in the Middle East has redrawn  the map of the Arab economy

Recent military developments in the region have reshaped the Arab economic landscape in a few weeks, pushing up energy, shipping, and insurance prices, and putting new pressures on growth and inflation from the Gulf to North Africa.

Instead of the reliably relied upon recovery trajectory this year, the region's economies found themselves in a shock that revealed a sharp disparity in affordability between energy-exporting and importing countries.

Sharp decline in growth prospects

In an economic report by Bloomberg, international institutions agreed that the Middle East has entered a period of sharp slowdown, with the International Monetary Fund (IMF) lowering its forecast for the region's growth in 2026 to just 1.1%, down from 3.9% in a previous forecast.

The World Bank also estimated the region's growth (excluding Iran) at 1.8 percent, noting that this slowdown is mainly concentrated in the Gulf and Iraq economies as a result of the disruption in energy exports and declining revenues.

The Gulf: Resilience thanks to infrastructure and alternatives

According to the report, the Gulf states are facing direct pressure due to the disruption of shipping through the Strait of Hormuz and the targeting of some energy facilities.

However, Saudi Arabia has emerged as a model of economic resilience, with the East-West pipeline contributing to maintaining oil flows to the Red Sea port of Yanbu, mitigating the impact of the interruptions.

While the World Bank lowered its growth forecast for GCC countries to 1.3 percent, IMF Managing Director Kristalina Georgieva stressed that the structural reforms adopted by these countries over the past decade have given them strong "buffers" to absorb the shock.

Variation of Cases: Qatar and Iraq in the Wind

On the other hand, figures from international institutions show great concern about some economies, as the IMF predicted a sharp contraction of the Qatari economy by 8.6% as a result of the failure of the Ras Laffan gas facility. Iraq is also facing a contraction of 6.8 percent, prompting Baghdad to urgently seek to diversify export routes through Turkey, Syria, and Jordan to reduce dependence on the Strait of Hormuz.

Egypt and Morocco: Import bill inflames prices

Beyond oil wells, energy and food importers have paid a heavy price: in Egypt, annual inflation accelerated to 15.2 percent in March, amid pressure on the Egyptian pound and rising shipping costs through the Suez Canal.

In Morocco, despite strong growth (4.9 percent), the energy import bill of more than $11 billion is straining public finances and raising fears of "stagflation."

Algeria and Libya: Taking advantage of location and geography

On the other side of the spectrum, Algeria benefited from higher energy prices and increased European demand for its gas through the Medgaz pipeline, with the IMF raising its growth forecast to 3.8%. Libya has also emerged as an alternative supplier and beneficiary of the war, as its supplies fall outside the scope of direct tensions in the Gulf.

Billions of dollars in losses

In conclusion, the United Nations Development Programme (UNDP) warned that total economic losses in Arab countries could reach $200 billion as a result of the war.

The biggest challenge for decision-makers in the region remains how to restore monetary balance and secure food and energy supply chains, amid the "extraordinary uncertainty" imposed by the continuation of the regional conflict.