World Bank Warns of Long-Term ‘Scarring’ From Iran War Across Middle East
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WASHINGTON: The World Bank has issued a stark warning regarding the economic future of the Middle East, projecting that regional growth will slow to just 1.8% this year. This represents a significant decline from the 4% expansion recorded in 2025, as the ongoing Iran war leaves deep and lasting "scarring" on the region’s productive capacity.
In its latest regional economic update, the bank emphasized that the conflict has triggered a ‘textbook supply shock.’ Even with the recent announcement of a two-week ceasefire and the reopening of the Strait of Hormuz, a waterway responsible for a fifth of the world’s oil transit, the damage to infrastructure and investor confidence remains severe.
Roberta Gatti, the World Bank’s Chief Economist for the region, noted that the closure of refineries and the displacement of populations will carry costs that outlast the conflict itself.
The Gulf region is facing the most direct exposure, with real GDP growth now pegged at 1.3%, down from 4.4% last year. The impact is most visible in Kuwait and Qatar, where economies are expected to contract sharply by 6.4% and 5.7%, respectively, following targeted strikes on energy sites. Meanwhile, Saudi Arabia’s growth forecast has been revised down to 3.1%, and the UAE is now estimated at 2.4%.
The report further cautioned that the war acts as ‘development in reverse.’ Analysis suggests that without the conflict, income per capita in affected nations could have grown by an average of 45% more over the next seven years.
Beyond the Middle East, the surge in oil prices which hit nearly $120 a barrel last month continues to ripple through global markets, potentially forcing central banks in Europe and Asia to keep interest rates higher for longer to combat persistent inflation.
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