Country Risk in MENA

Egypt (EGY)

Egypt’s overall risk level remains high. The U.S./Iran war has prompted a hit to Egypt, with Suez Canal traffic tempered by fears of a spread of the war to the Red Sea and tourist inflows hurt by regional instability.  This will likely mean that the 2026 GDP forecast of 4.2% by the IMF is too high, while inflation will likely overshoot the projection of 13.2% (partly because the government raised fuel prices in March). Nevertheless, Egypt is in a better situation than the 2022 Ukraine war, as large official loans and FDI from the Gulf states have transformed the central bank’s FX reserves and current account deficit financing. The Egyptian Pound has fallen 8% against the USD since the start of the war, but this is a considered adjustment given the U.S./Iran war. The sovereign non-payment risk thus remains at a medium high rating as the government debt/GDP is coming down multi-year. The risk of doing business is medium high and the inability of government to provide fiscal stimulus remains at high. However, it is noticeable that the UAE is displeased that they did not receive more Egyptian support during the war phase.  The UAE has a USD35bln Mediterranean resort being built.   

Meanwhile, the political violence risk rating remains very high, with political interference and legal & regulatory risk at high. Egypt remains concerned about the fragile peace in Gaza could be disrupted by Israel and the risk that it could spill over into domestic tensions, including the risk of displacement of Gaza residents. Meanwhile, the Israel/U.S. attack on Iran, has also prompted concerns over unrest in Egypt. Egypt/Israel relations are very strained.  The previous cost-of-living crisis also continues to risk future protests against inflation and unemployment.  

Iran (IRN)

The Islamic Republic of Iran maintains its very-high overall country risk rating, as the stalemate persists over finding a resolution to the ongoing U.S. – Israel conflict with Iran. Since the start of the war, Mojtaba Khamenei had been selected to replace his Supreme leader father Ayatollah Ali Khamenei shortly after he was killed in U.S. – Israeli air strikes. Three months on from the first missiles fired at Iran, the conflict has led to a fragile ceasefire that President Trump had reassured is still in place, even though exchange of fire continues to take place. Iran has expressed its willingness to consider a limited interim agreement and is currently reviewing a U.S. proposal. However, Tehran is taking a cautious approach, especially given its longstanding mistrust of the U.S. but also past disputes over compliance. Tehran has also issued additional threats to expand the blockade to the Bab El Mandeb Strait, at the mouth of the Red Sea, if Israel continues its strikes on Beirut. Political violence has therefore remained high. Political interference and legal & regulatory risk had been re-affirmed at a very-high risk rating. On the economic front, the IMF have signaled yet another contraction for Iran’s GDP growth this year, forecasting -6.1% in 2026 with an expected rebound at 3.2% in 2027. The ongoing conflict has placed the economy on a downward trajectory, creating significant uncertainty about its position in the coming years. The oil sector’s performance is currently constrained by the lack of movement through the Strait of Hormuz, while the non-oil sector is on a similar path due to destroyed infrastructure, weakened investment as well as shortages in water but also oil. Inflationary pressures are set to persist, as forecasts indicate a steep rise from 2025 to 68.9% in 2026, while real incomes continue to decline. Therefore, the risk of doing business remains high, while supply chain disruption has ultimately worsened to a similar risk rating of high. The government’s debt to GDP ratio is expected to continue its upward trajectory, reaching 37.3% in 2026 and 38.2% in 2027, amid elevated fiscal strain caused by a weaker tax base and rising demands for higher social spending. Sovereign non-payment risk has been re-assessed at a very-high rating.

Kuwait (KWT)

Kuwait’s overall risk rating remains at medium. The economy has been plunged into a deep recession by the closure of the Straits of Hormuz triggered by the U.S./Iran war.  The hydrocarbon sector, which accounted for nearly 45%of GDP and 84% of government revenue in 2025 means that GDP will likely fall by 15-20% in 2026. The government budget deficit is also likely to reach 15-20% of GDP versus the traditional large surplus, as the government is committed to expenditure to ensure social and political stability.  Even so, Kuwait’s financial wealth is over 500% of GDP and some of this will be rundown to finance the government deficit.  Additionally, the government debt/GDP was 14% in 2025 according to the IMF, which is very low and allows for one or two years of an awful budget deficit without problems. Thus, the sovereign non-payment risk is at medium-low, while banking sector vulnerabilities are also at medium-low. However, the long-term problem remains that the vast bulk of Kuwait’s exports goes through the Straits of Hormuz and a pipeline alternative is not currently being built.  This leaves Kuwait dependent on U.S./Iran negotiations. 

Domestic politics remain tense but stable. Political violence and legal and regulatory risk scores remain at medium. Parliament has been dissolved for up to 4 years, to help get necessary reforms through.  Though Kuwait is moving towards some long overdue structural reforms, the country faces pressure from the IMF to do more while the economy remains very reliant on fossil fuels. However, Kuwait will likely put priority on a new oil pipeline, rather than speeding up reforms or reducing non-oil expenditure. 

Lebanon (LBN)

Lebanon’s overall country risk rating has been maintained at high. Israeli military operations in Lebanon begun in March 2025, driven by Israel’s objective to disarm and dismantle the Iran backed-Hezbollah. Meanwhile, Lebanon is calling and actively pursuing a ceasefire to alleviate the Middle Eastern state’s critical humanitarian crisis. Lebanese President Joseph Aoun has made it clear that a ceasefire deal should be made into a permanent agreement, followed by the U.S. brokered ceasefire which paused six weeks of full-scale conflict. However, Hezbollah accused the Israeli military of breaching the truce launching attacks on civilians and infrastructure. Political interference has been re-affirmed at high. Political violence and legal & regulatory risk both remain very-high due to Hezbollah’s war with Israel. In terms of international relations with Beirut, France continues to express its deep concern over the escalating violence across Lebanon. Economically, GDP growth is expected to be heavily impacted by the ongoing war, with the Finance minister warning of a possible 7-10% contraction in 2026. Flight disruptions and uncertainties surrounding the region have halted tourism completely, normally a key driver for growth. At the same time, instability across the Gulf has placed additional pressure on Lebanon’s remittance inflows, which are a vital factor of Lebanon’s economy. Inflationary pressures are set to persist, as Lebanon’s dependence on oil for the generation of electricity is more critical than ever, while global energy prices remain elevated due to the ongoing Iran war. Therefore, the risk of doing business and supply chain disruption have both been re-affirmed at a high-risk. Banking sector vulnerability has seen marginal improvement, with its rating now at medium-high, whereas sovereign non-payment risk and exchange transfer remain unchanged at medium-high.

Libya (LBY)

Libya, a nation which is known to control the largest proven oil reserves in Africa as well as its fragile and divided state, has not seen any alteration in its overall country risk rating of very high. A political impasse remains between the UN-recognized Government of National Unity (GNU), who are based in the capital Tripoli, and led by Prime Minister Abdul Hamid Dbeibah, and the Government of National Stability (GNS), which is based in eastern Libya and led by Prime Minister Osama Hamad, with the backing of the House of Representatives (HoR) and the Libyan National Army (LNA) under the command of General Khalifa Haftar. The East-West division, resulting from the 2014-2020 civil war, has been met with a proposal of a unified interim government which would allow for the country to organize and hold national elections. Although a proposal which is fully supported by the GNS, the GNU continue to prolong the national stalemate by opposing the idea. Political interference and political violence both remain very high. In terms of the GNU, strong relations have been maintained with Turkey, Qatar and China, as evidenced by the discovery of Turkish and Chinese combat drones in eastern territory, reinforcing General Haftar’s hold over the east and major oilfields in the south. Continued violations of the long-standing U.N. embargo on supplying weapons to the North African nation indicate that a resolution between divisions in the east and west looks unlikely. Legal & regulatory risk continues to be assessed as very high. High oil prices and the Iran war has enabled Libya to increase its daily oil production to 1.43 mln barrels. Therefore, the IMF estimate GDP growth to remain stable at 6.7% in 2026 and 4.5% in 2027. However, oil and gas accounts for approximately 95% of Libya’s exports and government revenue, with limited diversification, and the tense relationship between the East-West has meant that the risk of doing business remains very high. In recent developments, the two rival legislative bodies of Libya have confirmed an agreement regarding its first LYD 190 bln (USD 30 bln) unified state budget in over a decade. A budget agreement that strengthens Libya’s financial stability shows there is a solution to the years of financial division, even as sovereign non-payment risk continues to be assessed as medium-high. Exchange transfer risk, however, remains very high following the Libyan Central Bank reporting a 14.7% devaluation of the Libyan dinar. Setting the exchange rate at 6.3 – 6.4 to the USD, while in the parallel market the Libyan dinar is experiencing high volatility at approximately 8.3 – 8.8 to the USD.

Morocco (MAR)

Morocco, maintains its overall country risk rating of medium following the nearby geopolitical Iran war uncertainties. PM Aziz Akhannouch has announced he will not run in the upcoming 2026 election with the National Rally of Independents (RNI) most likely nominating Mohamed Chouki as the groups next leader. Political violence remains medium-high, while political interference remains medium, as expectations foresee the coalition government holding its position in the upcoming elections. Recent cooperation with Spain has strengthened as Morocco is showing its efforts in reducing illegal migration attempts into Europe. Even though routes for migrants are changing due to tighter controls, last year saw 6.4% fewer attempts made by illegal migrants trying to reach Europe. In terms of regional relations, however, Morocco’s relationship with Algeria remains tense following Mali’s recent show of support for Morocco’s autonomy plan for Western Sahara. The proposal would allow residents to elect a local legislative, executive and judicial authority, while Morocco would hold jurisdiction over defense and foreign affairs. The Polisario Front, heavily backed by Algeria, is seeking to end Morocco’s control of the Western Sahara and is pushing for a referendum that includes independence as an option. Relations with Europe - particularly France and Spain - have seen major improvement, as both countries have expressed support for Morocco’s autonomy plan for Western Sahara. The North African State’s ties with the U.S. are substantial, especially after it became the first African country to sign President Trumps ‘Board of Peace’ charter in early 2026. Legal & regulatory risk is considered to have remained at medium-high.

According to the IMF, GDP growth is forecast to keep its consistency at a robust 4.9% in 2026 before easing slightly to 4.5% in 2027. Growth has been supported by a rebound in the country’s agricultural output, as previous droughts restricted its potential, but also a surge in large-scale infrastructure projects and tourism. For example, the planned USD 25 bln Nigeria-Morocco gas pipeline is expected to be signed this year supplying Morocco with a greater gas supply, while supporting exports into mainland Europe. The growth outlook, however, is somewhat dampened by the conflict in the Middle East, mainly through weaker global demand and a temporary rise in inflation driven largely by higher energy prices. Inflation is expected by the IMF to settle at 2% over the medium term, as Morocco’s central bank has maintained its policy rate of 2.25% in its latest meeting. Therefore, the risk of doing business is assessed at medium-low, while the government’s inability to provide stimulus is at medium. Lastly, sovereign non-payment risk remains medium-high due to the country’s high government debt to GDP. Although, a gradual reduction in debt to GDP is nevertheless apparent, with the IMF forecasting a decline to 60.5% by 2031.

Oman (OMN)

Overall risk has remained at a medium level. Under an absolute Monarchy where the Sultan holds both legislative and executive power, Sultan Haitham bin Tariq upholds his role as both Head of State and Prime Minister since he acceded the throne in January 2020. Oman’s position within the Middle East has exposed it to continuous spillovers from the U.S. – Israeli war with Iran. Iran’s Revolutionary Guard has launched numerous attacks upon U.S. vessels passing near Oman’s ports, including one incident in which an unidentified drone struck oil facilities within Port Salalah, temporarily halting operations. Iran has confirmed its efforts to create a sustainable security mechanism alongside Oman for the Strait of Hormuz, enabling safe shipping cooperation with Oman but also other coastal states. The potential introduction of a tolling system in the Strait of Hormuz had been discussed between Iran and Oman, in which the U.S. administration had quickly and aggressively shut down, warning its Gulf ally that supporting Iran on such an initiative could trigger sanctions. Political violence, political interference and legal & regulatory risk have for now all maintained a medium rating.

Meanwhile, the IMF has indicated that Oman’s GDP growth is set to remain resilient despite the Iran war. IMF forecasts 2026 GDP growth at 3.5%, followed by 3.4% in 2027. Oman’s position as a net exporter for both oil and fertilizer are likely to support the country’s economic situation, creating a fiscal cushion and stronger export revenues due to the current surge in global commodity prices. Nearby conflict along its coast lines have caused for supply chain disruptions, potentially offsetting flows of foreign investment as well as weighing on its growth outlook. In the light of this, supply chain disruption is now assessed at a worsened medium rating. Nevertheless, rising global energy prices are projected to place some pressure upon Oman’s inflation outlook, with the IMF indicating a rate of 1.7% for 2026 and 1.9% for 2027. The risk of doing business remains medium-low, with Oman’s 2040 vision aiming to develop its economic diversification and investment into non-hydrocarbon sectors. Lastly, sovereign non-payment risk is regarded to have remained medium, while exchange transfer has maintained a medium-low rating, supported by the Omani Rial’s (OMR) peg to the USD and the continued stability of the government’s debt to GDP ratio following the recent years of state-owned enterprise debt reduction.

West Bank/Gaza (PSE)

Phase 2 of President Trump’s 20-point peace deal has started with the top-level Board of Peace attracting a lot of publicity. Even so, the main focus remains on the 3rd tier National Committee for the Administration of Gaza (NCAG) aimed at improving life in Gaza. However, intermittent tensions and deadlock remain over Hamas’s rejection of full disarmament and Israel’s troop presence. All of this means that the ceasefire remains fragile. Gaza’s economic growth is projected to rebound strongly in 2026 due to the ultra-low base (The UN estimates Gaza’s 2024 economy was at only 13% of 2022 levels) if the ceasefire holds, but FDI and financing flows will be key to ensuring sustained growth in the coming years. West Bank tensions also remain. The Israeli government continues to approve more settlements, while also taking back some local authority powers. Some within the Israeli government see this as a way to dismiss the idea of a two-state solution, which Israel political parties do not support. This stance on the West Bank could also harden ahead of Israel’s autumn election, but momentum to formally annex the West Bank has slowed after pressure from the Trump administration. Israeli settlers/West bank Palestine tensions also remain high, which could worsen the unstable security and economic environment in the West Bank. All of this means that the West Bank and Gaza risk rating remains at high.

Yemen (YEM)

Yemen, has not seen improvement in its overall country risk rating of very-high. Yemen’s leadership is divided between the internationally recognized President Leadership Council (PLC) in the south, led by Chairman Rashad al-Alimi and primarily backed by Saudi Arabia, and the Houthi rebel government in the north and west. Prime Minister Salem bin Breik had formally submitted his resignation early this year, seeing his position filled by Foreign Minister Shaya Mohsen Zindani, following rising tensions between Saudi Arabia and the UAE. The Southern Transitional Council (STC) is a group backed by the UAE, seizing southern and eastern parts of Yemen in late 2025 which flared tensions with the strong Gulf power of Saudi Arabia. Rashad al-Alimi stated that Saudi-backed fighters had brought contested cities back under the Presidential Council’s control, followed by a further assertion of Saudi influence through a USD 500 mln pledge for development projects – prompting the UAE to withdraw its remaining forces. Political violence, political interference and legal & regulatory risk all remain at a very-high level, while many people had taken to the streets in southern Yemen to support the main separatist group, the STC. Yemen’s security landscape is further undermined by the Iran-backed Houthi movement, which has taken control over a large proportion of northern Yemen. The Houthi have demonstrated its missile and drone capabilities, but so far stayed out of the Iran war.

In the recent IMF April 2026 outlook, Yemen’s economy remains fragile but is expected to record its first positive growth since its deep recession in 2022, which followed a halt in the nation’s oil exports. The IMF foresee a 0.5% GDP growth rate in 2026 and 1.5% in 2027. Yemen remains highly exposed from its position in regards to the Iran war, with the Middle Eastern state’s reliance on its exports for essential goods. This dependence leaves Yemen vulnerable in regards to global commodity price volatility and ongoing supply disruptions. Inflationary pressures have therefore intensified with the IMF now forecasting a higher rate of 26.5% in 2026, followed by expectations of a downward trend in 2027 at 18.7%. Domestically, the relentless pressure from the Houthi’s has also heavily restricted the movement of aid into the nation. The U.N. state 4.8 mln people have been displaced internally, while nearly half-million children are in the need of treatment for severe malnutrition. Therefore, the risk of doing business remains very-high. Sovereign non-payment risk has improved to a medium-high rating, while exchange transfer remains high. The eventual rise in government revenues is expected to support imports, weak export growth and essential public services, somewhat easing domestic pressure.

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