From Divide to Opportunity: AI, Jobs, and Growth

Abstract

The Middle East, North Africa, Afghanistan, and Pakistan (MENAAP) region is facing severe economic costs due to the conflict that began in February 2026. Unlike previous energy shocks, which typically benefited oil exporters, the closure of the Strait of Hormuz has imposed the largest costs on Gulf oil-exporting economies. Regional output is projected to contract by 2.1% on average in 2026, after expanding by 3.3% in 2025. The effects extend well beyond energy markets, disrupting tourism, aviation, and logistics, while heightened uncertainty continues to weigh on financial markets and business sentiment.