IMF Forecasts Economic Contraction Across West and Central Asia Amid Iran War

By Staff, Agencies

The International Monetary Fund (IMF) has sharply downgraded its 2026 economic outlook for West and Central Asia, projecting a 0.3% contraction instead of the 1.9% growth forecast six months ago, as the war against Iran disrupts oil production, exports, and shipping through the Strait of Hormuz.

In its latest World Economic Outlook report, issued Tuesday, the IMF attributed the deterioration primarily to the prolonged closure of the strategic waterway, which has disrupted regional trade and energy supplies.

Iran closed the Strait of Hormuz following the launch of the latest round of US-"Israeli" aggression against the Islamic Republic on February 28. A Pakistan-mediated memorandum of understanding in June provided for a 60-day reopening period, but Tehran subsequently reimposed the closure, citing American violations.

On Monday, Iranian Foreign Ministry spokesman Esmaeil Baghaei reiterated Tehran’s condemnation of US actions, saying they had created insecurity in the strategic waterway.

“We are not pleased with this situation, because security in the Strait of Hormuz is essential above all to us,” Baghaei said, adding that the international community needed to understand which side was responsible for the disruption.

The IMF expects a substantial economic recovery in 2027, provided the Strait reopens and oil production, exports, and logistics return to normal.

Iraq, Kuwait, Qatar, and Bahrain are expected to face the heaviest economic losses, with the IMF projecting double-digit economic contractions in 2026. The fund anticipates double-digit expansions in these economies in 2027 if disruptions ease and regional economic activity recovers.