GCC economies are sliding into their worst crisis since the pandemic, as spillovers from the U.S.-Israel war with Iran have pushed oil prices sharply higher and triggered a historic supply shock. The near‑total closure of the Strait of Hormuz, through which one‑fifth of global energy supply passes, and damage to refineries and gas plants in Saudi Arabia , UAE , Kuwait and Qatar have nearly crippled the region's economies. Oil prices are now about 40% higher than before the war erupted, and the growth outlook has flipped from modest expansion to contraction. Qatar is expected to shrink 6.0%, Kuwait 4.4% and Bahrain 2.9% this year, compared with growth of 4.9%, 3.4% and 2.9% in January. UAE growth is now seen as stagnant, down from a 5.0% expansion forecast three months ago. Saudi Arabia and Oman are forecast to grow 2.6% and 2.2% respectively, well below their January forecasts of 4.3% and 2.8%. "The GDP-level that will emerge after the war is clearly lower for the next several years, despite a relatively swift recovery," said Ralf Wiegert, head of MENA economics at S&P Global Market Intelligence. "It will take the entire second half of 2026 to rebuild damaged assets and re-establish supply chains." Lluis Dalmau Taules, an economist at Allianz, added that the non-oil economy, especially tourism, will also suffer, "shaping a new reality for retail and other sectors." Economists at Goldman Sachs noted that the prolonged delay in returning to full production capacity will have a significant but uneven impact on GCC economies and public finances, while expecting a robust rebound in activity aided by high public investment and hydrocarbon revenue recovery. Economists expect a quick rebound in 2027, with Qatar , UAE and Kuwait projected to grow 7.8%, 5.4% and 5.0% respectively, and Saudi Arabia , Bahrain and Oman forecast to expand 4.5%, 4.3% and 2.8%. The IMF also anticipates that energy production and transport in the region will normalize in the coming months, supporting a recovery in hydrocarbon revenues and government savings. Inflation is rising across the Gulf, with Bahrain projected to average 2.4% in 2026, up from 1.4% in January, and the UAE , Qatar , Kuwait and Oman expected to average 2.6%, 2.6%, 2.9% and 1.7% respectively, compared with earlier forecasts of 1.9%, 2.0%, 2.3% and 1.4%.