Overview
- The General Authority for Statistics reported a 4.8% annual GDP decline in the second quarter, driven by a 24.7% drop in oil-sector activity.
- Non-oil activity slowed sharply to 0.6% growth in Q2, down from a stronger expansion in the previous quarter, showing limited offset to the oil slump.
- The fall in exports reflects shipping disruptions caused by the US–Iran conflict, effective closure of the Strait of Hormuz, and new risks at the Bab Al Mandeb strait that have cut conventional tanker flows.
- Producers have rerouted barrels through pipelines and Red Sea terminals to limit losses, and the IMF says growth could rebound to about 1.7% in 2026 if regular maritime traffic is restored.
- Recovery remains fragile because damaged infrastructure, insurance and crew hesitancy, and limits on alternate ports constrain how quickly exports can return to previous levels, so markets and policymakers are watching mediator talks and route security closely.