Amman:The conflict that erupted in February 2026 has been causing severe economic repercussions across the Middle East, North Africa, Afghanistan, and Pakistan (MENAAP), with Gulf oil exporters being the most affected due to the closure of the Strait of Hormuz, as reported by the World Bank.
According to Jordan News Agency, the World Bank's latest economic update for the region forecasts a contraction in regional output by an average of 2.1% in 2026, following a 3.3% expansion in 2025. The closure of the Strait of Hormuz has led to significant output and revenue losses for oil-exporting Gulf countries, unlike previous energy shocks that typically benefitted these exporters.
The Gulf Cooperation Council (GCC) economies are expected to shrink by an average of 4.3% this year, as noted in the report titled "From Divide to Opportunity: AI, Jobs, and Growth." The conflict's impact extends beyond energy concerns, affecting tourism, aviation, and logistics sectors, while increased uncertainty is impacting financial markets and business sentiment.
Conversely, oil-importing nations in the region have shown relative resilience, with anticipated growth rising to 4.3% in 2026, up from 3.9% in 2025. However, inflationary pressures are mounting, especially through rising food prices due to shipping disruptions, which are driving up import costs and straining supply chains.
In economies already fragile and conflict-affected, the shock is exacerbating existing vulnerabilities. Poverty levels are particularly concentrated in these areas, making MENAAP the only global region where poverty has increased over the past decade.
Should the conflict diminish by the end of 2026, regional growth, excluding Iran, is projected to recover to 7.8% in 2027, largely fueled by a resurgence in hydrocarbon production and exports. Nevertheless, the World Bank warns that a recovery is not assured and will necessitate ongoing policy efforts. Challenges such as damaged infrastructure, delayed investments, and depleted fiscal resources could hinder growth even after the immediate crisis has passed.
While addressing the immediate impacts of conflict and economic disruption, the report highlights the necessity for the region to prepare for a long-term transformation driven by artificial intelligence. AI is expected to enhance productivity rather than cause job losses due to automation.
The report indicates that less than 10% of jobs in the region are at risk of near-term automation, while 13% to 20% have significant potential for productivity enhancement through AI. To unlock AI's potential, the region needs to overcome structural barriers such as language and data underrepresentation, low AI tool usage, and gaps in human capital and infrastructure.
The World Bank sees regional cooperation on AI as a significant opportunity, suggesting that AI leaders like Saudi Arabia and the United Arab Emirates share their expertise with the region. Middle-income countries could contribute talent and data, while vulnerable economies might adopt affordable "Small AI" tools to improve essential services and support local businesses. Closing the gaps in skills, infrastructure, and institutions will be vital in leveraging AI for higher productivity and sustained growth.