The IMF’s latest October update was no surprise for those expecting GDP downgrades following the ongoing partial closure of the Strait of Hormuz yet Oman’s ongoing resilience to the Iran war is still surprising.
While the Sultanate is located outside of the Strait of Hormuz – connected to the Arabian Sea and Indian Ocean unlike other GCC states – the extent of positive growth and its 0.6% upwards revision is linked to other macroeconomic factors besides luck.
October MENA update
Speaking at the launch of the IMF’s October 2026 Regional Economic Outlook in Dubai, Dr Jihad Azour, Director of the IMF’s Middle East and Central Asia Department, said Oman had benefited from both its geographic position and reforms implemented over recent years.
“In this shock in particular geography, existing infrastructure in ports that are outside allow Oman to be less affected but also to benefit from this axis,” Dr Azour said.
Yet the IMF Director made the point that fiscal reforms are also significant since Oman had strengthened its economic fundamentals through fiscal reforms.
“Oman benefited over the last few years from a very comprehensive reform package that reduced the level of indebtedness and strengthened macroeconomic stability,” Dr Azour said.
The IMF revised the Sultanate’s growth for FY26 to 4.1% – up 0.6% points – from April’s initial assessment (3.5%, FY26).
IMF’s forecasts uneven patterns
The comments came as the IMF highlighted sharply divergent economic outcomes across the Gulf following disruption to energy production and transport.
Bahrain, Kuwait and Qatar were among the economies most affected by falling production and exports while the UAE experienced a smaller contraction and Oman maintained stronger growth, with a upwards revision of 0.6%, according to the IMF’s assessment.
“Countries who were subjected to the same shock behave differently not only because they have reserves but also because they have the right policies,” Dr Azour said.
He pointed to efforts by Gulf economies to diversify revenue sources beyond oil and strengthen their macroeconomic positions as important factors in mitigating the shock.
“Countries who have diversified their revenues outside oil in countries like the UAE, Saudi Arabia or Oman, who are increasing the level of revenues outside oil and strengthening their fundamental macroeconomic aggregates, benefited from those efforts,” the IMF Director said.
Regional connectivity
Oman’s relative resilience also reflects the potential benefits of closer regional economic integration, particularly as Gulf states seek alternatives to established export routes disrupted by the conflict.
Dr Azour said the UAE and Oman were increasing investment and integration, while the crisis had demonstrated the importance of shared infrastructure and more flexible trade and transport arrangements.
The IMF’s policy recommendations emphasise diversifying trade routes and markets, strengthening infrastructure redundancy and reducing barriers to regional commerce.
For Oman, the combination of ports, alternative export routes and improved fiscal fundamentals offers a foundation for navigating continued uncertainty.
The UAE is already developing alternative pipelines, in addition to the Habshan pipeline connecting Abu Dhabi-Fujairah, with ADNOC’s West-East pipeline running adjacent to the Habshan pipeline.
The new parallel pipeline is designed to double the country’s crude export capacity through the port of Fujairah, raising the total bypass capacity from about 1.8M barrels per day (bpd) to roughly 3.6M bpd.
Resilient infrastructure and fiscal buffers
The wider challenge for Gulf governments will be to sustain investment in economic resilience without weakening the fiscal buffers needed to absorb further shocks.
Dr Azour said countries should focus on strengthening their capacity to respond to future disruptions by deepening markets, upgrading institutional frameworks and expanding non-oil revenues.
Reforms to increase diversification while maintaining fiscal buffers would help economies withstand both external and domestic shocks in the medium to longer term.
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