A top official at the International Monetary Fund on Thursday said prewar buffers have helped limit the economic impact of the Iran war, while warning the region's outlook remains highly uncertain as it faces threats of renewed disruptions.
The prolonged closure of the Strait of Hormuz, through which one fifth of the world's energy supplies travelled before the war, has rattled markets, as have Iranian attacks on vessels in the waterway and key sites in neighbouring countries.
“The impact was more contained than the scale initially suggested,” the fund's regional director, Jihad Azour, told reporters during the IMF and World Bank annual meetings in Thailand.
While the price of Brent crude is 47 per cent higher than its prewar levels, it has yet to hit the $200-a-barrel mark that was previously feared. The IMF this week maintained its 2026 global growth projection at 3.1 per cent and slightly raised its 2027 forecast to 3.4 per cent. Higher oil prices were partially attributed to the fund lifting its 2026 inflation forecast to 4.7 per cent.
The UAE and Saudi Arabia have been exploring alternatives to send their supplies to markets, while International Energy Agency members agreed in March to release up to 425 million barrels of reserve stocks. Output from non-Gulf producers and an adjustment in energy demand have also mitigated the war's impact, Mr Azour said.
“These buffers bought time, but they are finite. Inventories are lower, spare capacity is tighter, and renewed disruption could generate much larger price adjustments,” he explained.
Iranian attacks continued in the Strait of Hormuz this week. At least 12 tankers have been attacked in and around the waterway in the past week, according to the UK Maritime Trade Operations agency.
On Wednesday, Iran-backed Houthi rebels attacked Saudi Aramco's headquarters. Authorities said no casualties were reported. Meanwhile, a cargo ship sank after hitting a naval mine in the Strait of Hormuz, Iran's Islamic Revolutionary Guard Corps Navy said in a statement.
The IEA said crude oil exports from Gulf producers, led by Saudi Arabia, jumped by 4.4 million barrels a day in September to reach more than 75 per cent of prewar levels. Iran's escalatory attacks on Saudi Arabia and tanker traffic threaten to derail those gains, the agency said.
Brent crude rose 0.36 per cent at $106.1 a barrel on Wednesday, while West Texas Intermediate, which tracks US crude, rose 1.08 per cent at $95.16 a barrel.
The IMF said its 2026 forecasts show a sharp divergence for oil exporters and importers, with the latter being assisted by remittances, tourism and government support.
Regional economies are forecast to see a sharp divergence in trends due to the war. The IMF projected economic contractions of 11.3 per cent for Bahrain, 16 per cent for Iraq, 16.7 per cent for Kuwait, 15.6 per cent for Qatar, 3.3 per cent for Saudi Arabia and 3.9 per cent for the UAE this year.
Growth is expected to rebound in 2027 “but output will remain below the medium-term path projected before the conflict”, Mr Azour said.
A more prolonged conflict remains the most significant risk for the region's highly uncertain outlook, with further disruptions likely to weaken economic activity, inflame inflationary pressures and place extra strain on fiscal positions across the region, he said. Mr Azour also said tighter financial conditions could deepen vulnerabilities in economies with large sovereign financing needs.
He urged the region's economies to prioritise price stability, rebuild their fiscal buffers and build capacity to withstand future shocks.
The IMF will release its outlook for the Middle East next week in Dubai.
On Wednesday, UAE central bank governor Khaled Balama noted the region's experiences have shown that resilience depends on how quickly economies adapt to changing circumstances while building their fiscal buffers, state news agency Wam reported.
Mr Balama was addressing the region's central bankers and finance ministers during a meeting alongside the IMF and World Bank gathering in Bangkok.
He also said the UAE economy has shown resilience, supported by its robust fiscal buffers, low levels of public debt and its vast sovereign assets, helping to reinforce investor and market confidence. He also emphasised the importance of strengthening international co-operation frameworks amid geopolitical tension.
Saudi Finance Minister Mohammed Al Jadaan was due to hold a media conference with IMF managing director Kristalina Georgieva on Saturday.
The International Monetary Finance Committee, which is the fund's policy advisory panel, announced this week it had extended Mr Al Jadaan's position as IMFC chair by another year after his term ends on January 3, 2027.