Gulf’s Energy Outlook Amid Conflict

The Gulf region sees restored oil and gas flows and a global shipping rebound amid the Strait of Hormuz reopening, but the impact of crisis will have far reaching implications for the regional and global investment landscape.

The IMF cut its 2026 economic growth forecast for the Middle East and North Africa (MENA) region to 1.1%, down from previous estimates of 3.9%, due to the regional conflict.

The Gulf states have been variably affected by the conflict. Several crude exporters face steep downgrades or contractions. Countries like Iran, Iraq, Kuwait, Qatar and Bahrain, lacking alternative routes, were forced to slash exports to minimal levels within days of the closure. They are heavily constrained by reduced production and decreased trade.

The IEA identified over 40 energy facilities across the region suffered "severe" to "very severe" damages due to the conflict. These include refineries, petrochemical plants, upstream oil and gas production sites, and two of the 14 liquefaction trains at Qatar’s Ras Laffan LNG complex. The destruction wiped out approximately 13 million barrels of daily crude production. Energy experts estimate it could take 2 or more years to fully restore production capacities.

The IMF projects Qatar’s GDP will contract by 8.6%, marking a severe downturn compared to the 2.8% growth recorded in 2025. Iraq’s economy is expected to shrink 6.8%.

The UAE has restored most of its oil export capacity disrupted by the conflict, with shipments in early June recovering to nearly 85% of pre-war levels, according to the IEA. The country currently produces around 3.7mbpd of crude and has outlined plans to increase capacity to 5mbpd by 2027. Oman, lying outside the strait, has been unaffected.

Saudi Arabia has maintained around 60% of pre-conflict oil export levels through its bypass pipeline. The country’s oil revenue surged as price gains more than offset volume losses. The conflict has disrupted that momentum, but the IMF projects growth of around 2% for 2026.

The MENA region has over $640bn worth of oil, gas and petrochemicals projects currently in the pipeline. The oil companies are prioritizing integrated downstream development, unconventional gas expansion, and strategic pipeline routes designed to bypass regional maritime chokepoints.

Projects worth more than $43bn are being accelerated as countries seek alternative routes for their oil and gas exports, and other countries seek to boost profits amid high energy prices.

The Mena region is emerging as a major global hub for clean industrial investment of around $642bn. Oman has the largest committed pipeline value at $271bn, including a green ammonia facility in Duqm that has already reached final investment decision. In Saudi Arabia, the Neom Green Hydrogen Project is a flagship 1.2 million-tonne clean ammonia initiative. The UAE is advancing sustainable aviation fuel projects in Abu Dhabi and Fujairah.

Renewable with battery storage is also gaining momentum as a core element of grid upgrades and operational reliability, particularly to stabilize renewable-heavy networks. Saudi Arabia and the UAE are mandating storage alongside new solar and wind builds. Saudi Arabia plans to deploy 130 GW of renewable energy capacity and 48 GWh of energy storage and achieve 50% clean power generation by 2030.

The growth is expected to rebound next year owing to renewed maritime stability.

Editor