The collapse in French business activity reflects a potent mix of geopolitical uncertainty, subdued client spending, and rising input costs that are directly linked to the conflict's impact on energy prices .

The Strait of Hormuz: A Supply-Chain Shockwaves Epicenter

The primary transmission mechanism of this economic shock is the effective closure of the Strait of Hormuz, through which approximately 20% of global oil supplies normally pass . Over ten weeks into the disruption, daily vessel crossings remained more than 95% below pre-conflict levels, with over 1,550 commercial vessels stranded . The IMF has characterized the war's impact, alongside the destruction of energy infrastructure, as a shock that "started as a regional one but soon became a global one" .

This energy and shipping crisis has translated directly into deteriorating PMI data across the Gulf Cooperation Council (GCC) states. The PwC Middle East Economy Watch confirmed that March and April PMIs for all four GCC economies covered by S&P Global "recorded a weakening in non-oil sector activity, although to varying extents" .

Saudi Arabia experienced the most dramatic reversal. Its non-oil PMI plunged to 48.8 in March from 56.1 in February, its first contraction in over five years . This was part of a broader Q1 GDP contraction of 1.5% quarter-on-quarter, driven by a 7.2% decline in oil sector activity . While it rebounded above the 50.0 expansion mark in April, the initial shock demonstrated the vulnerability of non-oil sectors to a supply-driven crisis .

The United Arab Emirates, the region's most diversified economy, showed more resilience but still weakened sharply. Its PMI slowed to 52.9 in March—a near three-year low—and remained in expansion but faced continued headwinds in April and May .

Kuwait suffered an immediate and severe downturn. Its PMI collapsed from 54.5 in February to 46.3 in March—its first contraction in 19 months. This reading remained unchanged at 46.3 in April, signaling an entrenched contraction before showing signs of easing in May . Qatar similarly signaled ongoing contraction through April .

Egypt's Downturn Deepens

Egypt, a major energy importer, has been severely exposed to the commodity price shock. Its non-oil PMI has remained firmly in contraction throughout the conflict:

• March: The PMI fell to 48.0, its lowest level in nearly two years, as soaring input costs and weaker demand weighed on businesses. Input cost inflation accelerated to the joint-sharpest pace in 18 months, driven by higher fuel prices and a stronger US dollar .
• April: The contraction deepened further, with the headline PMI dropping to 46.6, marking a third consecutive month of decline .
• May: The downturn persisted, with a reading of 47.1, still solidly below the 50.0 breakeven mark .

The Expert Diagnosis: A Global Shock with Stark Warnings

International financial institutions have issued a chorus of warnings, downgrading growth forecasts and highlighting the global nature of the supply shock.

• IMF (April 2026): The Regional Economic Outlook slashed the 2026 growth forecast for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region to 1.4%, a massive downgrade of 2.3 percentage points from October 2025 forecasts. The report noted Brent crude had risen above $100 per barrel .
• World Bank (April 2026): The MENAAP Economic Update stated that the conflict's closure of the Strait of Hormuz and destruction of energy infrastructure has "disrupted markets, increased financial volatility, and weakened the 2026 growth outlook," projecting regional growth of just 1.8% (excluding Iran) . The World Bank forecast severe 2026 GDP contractions for Iraq (-8.6%), Kuwait (-6.4%), and Qatar (-5.7%) due to their dependence on hydrocarbon exports routed through Hormuz .
• IEA/IMF/World Bank Coordination Group: The newly formed group warned that the war has created one of the largest energy supply shortages on record, feeding through into "oil, gas, fertilizer, food, tourism and broader supply-chain stress" .
• UN (Mid-2026 Report): The report stated the crisis has "halted the global disinflation trend," forecasting inflation to accelerate from 4.2% to 5.2% in developing economies as higher energy, transport, and import costs take hold .
• ING (April 2026): An analysis of the eurozone PMI's drop to a 10-month low of 50.5 concluded that the war has "put paid to hopes of short-term growth acceleration," with businesses reporting significant increases in input costs and a severely weakened economic outlook .

The PMI data paints a clear picture of an economic shock that is both broad and deep, radiating from a blocked chokepoint to disrupt factory floors, service counters, and government budgets worldwide.

The collapse in French business activity reflects a potent mix of geopolitical uncertainty, subdued client spending, and rising input costs that are directly linked to the conflict's impact on energy prices .

The Strait of Hormuz: A Supply-Chain Shockwaves Epicenter

The primary transmission mechanism of this economic shock is the effective closure of the Strait of Hormuz, through which approximately 20% of global oil supplies normally pass . Over ten weeks into the disruption, daily vessel crossings remained more than 95% below pre-conflict levels, with over 1,550 commercial vessels stranded . The IMF has characterized the war's impact, alongside the destruction of energy infrastructure, as a shock that "started as a regional one but soon became a global one" .

This energy and shipping crisis has translated directly into deteriorating PMI data across the Gulf Cooperation Council (GCC) states. The PwC Middle East Economy Watch confirmed that March and April PMIs for all four GCC economies covered by S&P Global "recorded a weakening in non-oil sector activity, although to varying extents" .

Saudi Arabia experienced the most dramatic reversal. Its non-oil PMI plunged to 48.8 in March from 56.1 in February, its first contraction in over five years . This was part of a broader Q1 GDP contraction of 1.5% quarter-on-quarter, driven by a 7.2% decline in oil sector activity . While it rebounded above the 50.0 expansion mark in April, the initial shock demonstrated the vulnerability of non-oil sectors to a supply-driven crisis .

The United Arab Emirates, the region's most diversified economy, showed more resilience but still weakened sharply. Its PMI slowed to 52.9 in March—a near three-year low—and remained in expansion but faced continued headwinds in April and May .

Kuwait suffered an immediate and severe downturn. Its PMI collapsed from 54.5 in February to 46.3 in March—its first contraction in 19 months. This reading remained unchanged at 46.3 in April, signaling an entrenched contraction before showing signs of easing in May . Qatar similarly signaled ongoing contraction through April .

Egypt's Downturn Deepens

Egypt, a major energy importer, has been severely exposed to the commodity price shock. Its non-oil PMI has remained firmly in contraction throughout the conflict:

• March: The PMI fell to 48.0, its lowest level in nearly two years, as soaring input costs and weaker demand weighed on businesses. Input cost inflation accelerated to the joint-sharpest pace in 18 months, driven by higher fuel prices and a stronger US dollar .
• April: The contraction deepened further, with the headline PMI dropping to 46.6, marking a third consecutive month of decline .
• May: The downturn persisted, with a reading of 47.1, still solidly below the 50.0 breakeven mark .

The Expert Diagnosis: A Global Shock with Stark Warnings

International financial institutions have issued a chorus of warnings, downgrading growth forecasts and highlighting the global nature of the supply shock.

• IMF (April 2026): The Regional Economic Outlook slashed the 2026 growth forecast for the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region to 1.4%, a massive downgrade of 2.3 percentage points from October 2025 forecasts. The report noted Brent crude had risen above $100 per barrel .
• World Bank (April 2026): The MENAAP Economic Update stated that the conflict's closure of the Strait of Hormuz and destruction of energy infrastructure has "disrupted markets, increased financial volatility, and weakened the 2026 growth outlook," projecting regional growth of just 1.8% (excluding Iran) . The World Bank forecast severe 2026 GDP contractions for Iraq (-8.6%), Kuwait (-6.4%), and Qatar (-5.7%) due to their dependence on hydrocarbon exports routed through Hormuz .
• IEA/IMF/World Bank Coordination Group: The newly formed group warned that the war has created one of the largest energy supply shortages on record, feeding through into "oil, gas, fertilizer, food, tourism and broader supply-chain stress" .
• UN (Mid-2026 Report): The report stated the crisis has "halted the global disinflation trend," forecasting inflation to accelerate from 4.2% to 5.2% in developing economies as higher energy, transport, and import costs take hold .
• ING (April 2026): An analysis of the eurozone PMI's drop to a 10-month low of 50.5 concluded that the war has "put paid to hopes of short-term growth acceleration," with businesses reporting significant increases in input costs and a severely weakened economic outlook .

The PMI data paints a clear picture of an economic shock that is both broad and deep, radiating from a blocked chokepoint to disrupt factory floors, service counters, and government budgets worldwide.