Hormuz Disruption Hits Bahrain Economy
Oil sector slump weighs on Q1 economy as non-oil activities continue to grow
Hormuz Disruption Hits Bahrain Economy
GDP: Real GDP contracted 3.8% in Q1.
Non-oil growth: Non-oil activities grew 2.2%.
FDI: Inward FDI rose 2.6%.
IndicatorQ1 2026Real GDP growth-3.8%Current-price GDP growth-2.7%Oil activity growth-37.2%Non-oil activity growth+2.2%Non-oil share of real GDP90.1%Inward FDI growth+2.6%Total FDI stockBHD17.6bnFinancial & insurance sector growth+8.6%ICT Development Index6th globally
The national economy recorded strong performance in January and February 2026, before it was impacted in March 2026 due to hostile Iranian aggression on the Kingdom.
Real GDP contracted by 3.8% year-on-year in the first quarter of 2026, mainly due to a sharp decline in oil activities following restrictions on maritime traffic through the Strait of Hormuz and scheduled maintenance.
According to preliminary national accounts data from the Information & eGovernment Authority, oil activities fell 37.2%, while non-oil activities grew 2.2% despite the impact of events in March.
At current prices, GDP declined 2.7%, with oil activities falling 31.1% and non-oil activities rising 1.9%.
Non-oil economy holds firm
Non-oil activities accounted for 90.1% of real GDP, with nine of 13 sectors recording growth.
Financial and insurance activities were the largest contributor, accounting for 19.7% of GDP and growing 8.6%. Manufacturing contributed 14.6%, public administration 9%, and construction 7%.
Bahrain scores global rankings
The report also highlighted Bahrain’s performance in international economic and development indicators. The Kingdom ranked first globally in 67 indicators, while placing among the top five in 120 and top 10 in 206 indicators.
Bahrain ranked first globally in public-private partnerships, Islamic finance governance, and attracting investments. It also rose three places to sixth globally in the 2026 ICT Development Index, covering 159 economies.
Conclusion
Bahrain's economy experienced a challenging first quarter in 2026, marked by a significant real GDP contraction of 3.8% due to disruptions in the Strait of Hormuz and a sharp decline in oil activities. Despite these external pressures, the non-oil sector demonstrated resilience, growing by 2.2% and accounting for a substantial 90.1% of real GDP, with strong contributions from financial and insurance activities. Furthermore, Bahrain continues to solidify its global standing, achieving top rankings in numerous international economic and development indicators, including public-private partnerships, Islamic finance governance, and the ICT Development Index. This dual performance highlights the economy's vulnerability to regional geopolitical events while underscoring the robust growth and diversification efforts within its non-oil sectors.
