The Middle East and Central Asia is the only region in the world set to see negative economic growth in the final few months of 2026, according to the International Monetary Fund's latest forecast.
The overall drop in gross domestic product (GDP) is forecast to be 0.3% across the Middle East and Central Asia.
The countries in the region with the highest level of economic contraction are Gulf states that rely on oil exports, which have been severely affected by ongoing conflicts in the region.
Kuwait, Iraq and Qatar are forecast to have the largest economic slump, with GDP in these countries set to fall by 16.7%, 16% and 15.6% respectively.
The Strait of Hormuz has been closed by Iran in retaliation for the US and Israel lauching a war against the country. Both the US and Iran are now claiming control of the waterway, which is a key export sites for goods, particularly oil, to and from the Gulf.
This has made it difficult for Gulf states to export oil outside the region, leading to a worldwide increase in prices and a severe recession in the Gulf.
Kuwait, Iraq and Qatar have less diverse economies than their Gulf neighbours Saudi Arabia and the UAE, whose economies are forecast to drop by 3.3% and 3.9% respectively.
"Qatar and Kuwait depend wholeheartedly on the wholesale of energy," Fawaz A Gerges, Professor of International Relations at the London School of Economics, told The New Arab, "their economy is very much narrower, limited to basically energy. While Iran, Dubai and Abu Dhabi have succeeded in diversifying their economies to a certain extent."
The forecasts are based on economic figures from a few months ago, prior to Saudi Arabia's recent involvement in Yemen's war. Last month the Houthis bombed Saudi Arabia's East-West pipeline, which became a key piece of infrastructure for oil exports after the closure of the Strait of Hormuz.
This has further disrupted Saudi oil exports, which could mean that Saudi Arabia's economic contraction will be higher than the recent forecasts show.
However, after the pipeline was damaged, Saudi Arabia increased their exports via the Strait of Hormuz.
"After the pipeline was hit, the Saudis noticed that it was now kind of feasible to get oil out through the Strait of Hormuz," David Butter, economic analyst and associate fellow of Chatham House's MENA programme told The New Arab, "so strangely enough, probably production and exports have actually increased since the Houthis started to target Saudi Arabia."
Iran, which has been a centre point of the regional war since the US and Israel launched their invasion last February, is set to see slightly lower economic contraction than some other countries in the Gulf at 7.6%.
The difference in contraction between Iran and countries like Kuwait and Iraq is in part due to Iran's economic diversity. However, the war has also provided an opportunity for economic growth.
"The military economy actually feeds into the GDP," Butter said, "there will be a big step up in the production of weapons, and maybe payments to soldiers."
Though they expect the Gulf's economy to shrink in the final quarter of 2026, the IMF are predicted that the economies of various countries will recover in 2027.
"The assumption there is that a lot of things will return to normal in 2027," Butter said.
"Of course. that's not necessarily going to be the case."