Saudi to outgrow Gulf despite a downgrade, World Bank

Saudi Arabia will outgrow every other major Gulf oil producer this year despite the conflict choking traffic through Hormuz. The World Bank trimmed the Kingdom’s 2026 growth forecast to 3.1% in its June Global Economic Prospects report (pdf), down 1.2 percentage points from its January forecasts, but still the shallowest downgrade in the GCC.

The gap is wide: The bank sees Qatar’s economy shrinking 5.7% this year, while Kuwait is set for a 6.3% contraction and Iraq an even bigger 8.9%. The UAE and Oman are both forecasted to grow 2.4%, 0.7 percentage points below Saudi Arabia.

The credit goes to the East-West pipeline running oil from the Eastern Province to Yanbu, which is letting Riyadh maintain a chunk of exports, the bank said. Gulf neighbors lack a comparable exit.

Higher oil prices will also soften the blow. Brent is expected to average USD 94 / bbl in 2026, up 36% from 2025 and more than 50% above the January projection. The disruption keeping energy markets tight will prove a near-term revenue boost for oil producers still able to export through the strait, the bank added.

What’s next?

It’s all about the strait. The baseline assumes shipping stays severely disrupted through July before normalizing by year-end, with Saudi growth rebounding to 4.9% in 2027 — an upgrade of half a point from January projections.

The risk lives in the downside scenario: If Hormuz stays effectively shut into 4Q 2026, Brent surges to USD 115 / bbl and global growth drops to 2.1%. A longer closure would test the pipeline’s viability as it has a finite capacity ceiling, standing currently at 7 mn bbl / d, although Aramco said last month it plans to invest in increasing its capacity.