Prolonged regional conflict could drag UAE growth to 1.4% as BMI slashes GCC outlook

The UAE’s GDP growth could plummet to about 1.4% in 2026 if the US-Iran war extends through May without a diplomatic breakthrough, Fitch Solutions' Research Unit BMI MENA Country Risk Senior Analyst Mariette Kas-Hanna said in a webinar attended by EnterpriseAM. This marks a massive downgrade from the agency’s previous forecast of 5%.

^ That’s still better than Goldman Sachs’ forecast of a 5% contraction if the war lasts through the end of the month.

Growth across the GCC has been slashed to 1.9% for 2026, down from a previous estimate of 4.8% and from 4.4% in 2025. The revision is primarily due to the region’s high exposure to disruptions in the Strait of Hormuz. “Any sustained disruption would affect not only energy exports but also non-energy exports, re-exports, and imports,” Kas-Hanna explained.

The UAE loses about half of its oil production if the war continues, putting it in a better position than other Gulf countries like Kuwait and Qatar since it’s able to reroute its exports through the Fujairah pipeline, according to BMI's Head of MENA Country Risk Ramona Moubarak. This allows the country to maintain a critical revenue stream from hydrocarbons that peers lack.

By the numbers: The UAE’s revenues are down 2.6% to USD 6.58 bn y-o-y in March, according to Kpler data cited by Reuters.

MENA at a standstill: The broader MENA growth outlook has been dragged down by 2.9 percentage points to just 1%, “making it the slowest growing region globally,” Kas-Hanna noted. This aligns closely with recent IMF projections placing MENA growth at 1.1%, though the Fund remains more optimistic about the UAE, forecasting 3.1% growth.

The regional outlook is currently split between a 55% “extend to end” base case and a 45% “extend to escalate” scenario, Moubarak explained. Under the base case, hostilities are contained through April, leading to a diplomatic framework as both the US and Iran seek to avoid the structural costs of a full-scale war, and Brent would average about USD 78 / bbl.

In a more severe escalation scenario, oil prices could spike to as high as USD 150 / bbl in a “level 3” case involving an uncontrolled, prolonged war that inflicts structural damage on energy infrastructure. Under “level 1” and “level 2” scenarios, which would see Houthi-led disruptions in Bab Al Mandeb and temporary closures of key maritime chokepoints, prices would likely range between USD 115-130 / bbl, Moubarak explained.