IMF warns prolonged war could deepen Middle East economic shock

The International Monetary Fund warned that prolonged war and renewed disruptions to energy production, shipping routes or critical infrastructure pose the biggest risks to Middle East and Central Asian economies. Jihad Azour, the IMF’s director for the Middle East and Central Asia, said the shock is uneven, with directly affected countries under severe pressure.

Pre-war surpluses, alternative routes, changes in demand and inventory drawdowns have helped contain the energy shock, Azour said. But he warned those buffers are finite, with lower inventories and tighter spare capacity leaving the region exposed to larger price adjustments.

The IMF forecasts a 1.3% contraction in the Middle East, North Africa and Pakistan region in 2026, after 3.3% growth in 2025. It expects growth to rebound to 6.6% in 2027, though Azour said outcomes would vary considerably across countries.

In the Caucasus and Central Asia, growth is projected to slow to 5.2% in 2026 and 5% in 2027, from 6.2% in 2025. Azour said policymakers should prioritize price stability and rebuild fiscal buffers.

Separately, IMF Managing Director Kristalina Georgieva warned that strikes on Saudi infrastructure by Yemen’s Houthis could affect the global economy, according to OilPrice.com. Georgieva said disruptions in the Red Sea and near-closure of the Strait of Hormuz had curtailed oil and gas exports, while damage to energy facilities had reduced production capacity.