The forecast for region-wide GDP growth in MENA in 2026 has been revised from 3.9% to 3.1%, in line with the base-case assumption that the US-Iran conflict will be time-bound for up to four weeks, said BMI, a UK multinational research firm and a subsidiary of Fitch Solutions.
The conflict has so far affected 12 MENA economies: the six states of the Gulf Cooperation Council (GCC), Israel, Iran, Iraq, Egypt, Jordan and Lebanon. Spillovers are also extending beyond these markets, with other markets – such as Syria – already registering higher food inflation. If sustained, and combined with elevated global food prices, the oil price shock would see the conflict’s impact extend to previously more insulated North African economies, including Morocco, Tunisia, Algeria and Libya (although high oil prices and extensive subsidies in Algeria and Libya will cushion the impact).
Across the region, particularly in the GCC, growth in 2026 is slower than envisioned in BMI’s pre-conflict baseline, reflecting common channels. These include weaker consumer and investor sentiment, as well as reduced tourism and aviation flows amid elevated security risks, disruption to trade, logistics and re-exports from airspace closures, port avoidance and bottlenecks, and temporary hydrocarbon output interruptions. In Egypt, risk-off sentiment and higher commodity prices are weighing on the currency, feeding into inflation, eroding purchasing power and tightening external financing conditions. Along with Jordan and Iraq, Egypt also faces gas shortages affecting power generation.
BMI added, “Our base case nonetheless sees impacts concentrated in 1Q-2Q 2026 and a relatively prompt normalisation of operating conditions following the cessation of hostilities, supporting a contained impact on regional growth in 2026 for key markets.”
The base case implies a small set of relative beneficiaries. These include Algeria, which is well-positioned to benefit from a conflict-driven increase in oil prices, provided the associated rise in import costs remains contained. Higher hydrocarbon prices would ease pressure on its fiscal and external balances, reduce strains on the dinar and support continued social spending and public investment. Libya may also experience short-term macroeconomic relief, contingent on domestic political conditions, as stronger oil revenues improve the external position, bolster FX liquidity and relieve pressure in the parallel market, reducing the need for further currency adjustments.
MENA economies would face broader and more persistent constraints on growth under an ‘Extend to End’ scenario in which the war concludes by the end of April 2026, BMI said. Growth would be increasingly constrained by prolonged hydrocarbon outages, persistent trade and logistics disruption and sustained weakness in tourism and other tradable services.