IMF: Prolonged War Is Biggest Risk to Regional Economy
The International Monetary Fund (IMF) has warned that a prolonged war in the Middle East, along with further disruptions to energy production, shipping routes, or critical infrastructure, poses the biggest risk to the economies of the Middle East and Central Asia. The warning was delivered by Jihad Azour, the IMF's Director for the Middle East and Central Asia, at a press conference on the sidelines of the IMF and World Bank Annual Meetings in Bangkok, Thailand, on Thursday (10/15/2026).
According to Azour, the war has imposed a highly uneven economic shock across the region, with directly affected states under severe pressure. The outlook, he said, depends critically on how quickly energy production and trade normalize, and on countries' ability to preserve macroeconomic stability.
IMF Projection: 1.3 Percent Contraction in 2026
The IMF projects a deep contraction of 1.3 percent for the Middle East, North Africa, and Pakistan region in 2026, after the region grew 3.3 percent in 2025. A strong but uneven rebound is expected in 2027, with growth reaching 6.6 percent, though with wide differences across countries.
Oil-exporting countries directly affected by the war are expected to post a significant contraction in 2026, then rebound sharply in 2027 as energy production normalizes. Even so, output is projected to remain below pre-war medium-term projections.
Buffers Thinning, New Disruptions Risk Bigger Shocks
Azour explained that pre-war surpluses, alternative routes, demand adjustments, and substantial inventory drawdowns had helped contain the energy shock caused by the US-Israeli-led attacks on Iran and Tehran's subsequent closure of the Strait of Hormuz. But those buffers are now thinning.
Inventories are lower and spare capacity is tighter, meaning renewed disruption could generate much larger price adjustments. The warning comes amid escalating attacks around the Strait of Hormuz, including two cargo ships sinking within the last 24 hours.
Georgieva: Attacks on Saudi Arabia Have Global Fallout
Separately, IMF Managing Director Kristalina Georgieva warned that Houthi strikes on Saudi infrastructure could affect the global economy. The near closure of Hormuz and disruptions in the Red Sea have sharply curtailed oil and gas exports, damaged production capacity, and constrained non-hydrocarbon activity.
The IMF is scheduled to release a fuller regional economic outlook on October 22, predicated on trade and shipping returning to normal in the first quarter of 2027.
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