UAE: GDP growth hits five-year low in Q1 due to Iran war
GDP growth hits five-year low in Q1: The UAE’s annual GDP growth fell to 3.0% in Q1 2026 from Q4 2025’s four-year high of 8.5%, marking the weakest result in five years and the first quarter of data covering the Iran war.
Both hydrocarbon and non-hydrocarbon sectors lose steam: Compared to the prior quarter, readings in Q1 worsened for both the oil-and-gas sector (-3.5% in year-on-year terms vs +9.9% in Q4) and the non-oil-and-gas sector (+4.8% yoy vs +8.1% in Q4).
The contraction in the oil-and-gas sector—the sharpest in over two years—came as Iranian missile strikes and blockade of the Hormuz Strait throttled output.
Meanwhile, the result for the non-oil-and-gas sector—the worst since Q1 2021—reflected slower expansions in wholesale and retail trade, construction, manufacturing and real estate plus shrinkages in logistics plus manufacturing.
Panelist insight: On their outlook for the UAE, economists at the EIU said:
“The geopolitical landscape has deteriorated following the early July collapse of the ceasefire and the subsequent maritime tanker strikes, prolonging shipping obstruction. Severe economic disruptions will delay a full recovery, with oil production not returning to pre-conflict levels before September-October 2026. We continue to project that real GDP will contract by 3.3% in 2026, then rebound by 7.6% in 2027, with oil production recovering in the fourth quarter of 2026 and major non-hydrocarbon sectors bouncing back.”