Global Economy — 2026-07-09

IMF Cuts Middle East 2026 Growth Forecast to 0.7 Percent Citing Hormuz Closure Fallout

BLUFEven the IMF's sharply downgraded 0.7 percent regional forecast is unlikely to hold by its April 2027 reassessment, given the baseline Hormuz reopening assumption collapsed within days of publication.

The IMF cut its 2026 growth forecast for the Middle East and Central Asia to 0.7 percent, a 1.2 percentage point downgrade from April, citing prolonged disruption to Strait of Hormuz traffic that carries roughly a fifth of world oil supply 12. The fund raised its 2027 regional forecast by 1.9 points to 6.5 percent, and identified Iraq, Kuwait and Qatar as facing sharp 2026 contractions followed by double-digit rebounds next year 13. Saudi Arabia's growth forecast was cut 1.4 points to 1.7 percent, softened by its East-West pipeline route, while Hormuz traffic remains at roughly a third of prewar levels according to Kpler data cited by AGBI 3. The IMF's baseline assumes the strait begins reopening in mid-July and reaches prewar conditions by March 2027, and left global 2026 growth at 3.0 percent while raising its inflation forecast to 4.7 percent 24. The projections were finalized before US strikes on Iran on Tuesday and President Trump's Wednesday statement that the ceasefire was "over" 12.

Analysis
The IMF's 0.7 percent baseline assumes Hormuz traffic begins reopening this month and reaches prewar volumes by March 2027, an assumption Tuesday's US strikes and Trump's declaration that the ceasefire is "over" put in direct question, making that outturn unlikely by the time the fund reassesses in its April 2027 outlook. Iraq, Kuwait and Qatar carry the largest downside given their dependence on strait throughput, while Saudi Arabia's pipeline workaround caps its exposure. High confidence rests on Kpler shipping data and IEA production figures corroborating the disruption independent of the IMF's own modeling, with sourcing showing broad corroboration off the single IMF release. The downgrade may instead reflect damage already locked in through the April cutoff rather than forward risk from this week's strikes, leaving the 2026 figure intact if reopening resumes regardless. A derailed path would force immediate revision of oil hedges and Iraqi, Kuwaiti and Qatari budget assumptions built on a 2027 rebound.
4 sources
  1. IMF cuts Middle East growth forecast to 0.7% after Hormuz closure - The National
  2. IMF edges 2026 global growth forecast lower to 3%, sees rebound in 2027 - Reuters
  3. War's grip on Middle East economies tightening, IMF says - AGBI
  4. IMF lowers global growth forecast again citing war, trade and lofty AI expectations - The Globe and Mail

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