IMF: Ongoing Conflict Reshaping Investment Trends Across Middle East

A senior official at the International Monetary Fund has warned that the current conflict in the Middle East marks a turning point for regional investment patterns, citing unprecedented geopolitical and economic disruptions that are likely to influence future capital flows.

Speaking at the World Policy Conference in France, Jihad Azour, Director of the IMF’s Middle East and Central Asia Department said the ongoing escalation differs significantly from previous conflicts in both scale and impact.

Azour outlined three key factors that distinguish the current crisis and are expected to shape reconstruction efforts and investor confidence in the region.

The first, he noted, is the unprecedented testing of a critical strategic chokepoint: the Strait of Hormuz. Unlike past regional conflicts, the potential disruption or closure of the strait represents a scenario never previously realized, despite decades of tensions. Such a development underscores the outsized role of energy shocks in reshaping global alliances.

He drew parallels with the 1973 oil crisis, which had a profound effect on the United States and contributed to the formation of long-standing strategic partnerships between Washington and key Middle Eastern producers.

The second factor, Azour explained, concerns evolving relationships with international partners, particularly as countries reassess geopolitical risks and economic dependencies. The third centers on the need to build more effective self-defense systems in response to increasingly unconventional threats.

“The nature of threats has changed,” Azour said, pointing to the growing use of drones and light military equipment. “Traditional naval power alone is no longer sufficient to guarantee security.”

He added that recent attacks have targeted oil facilities and infrastructure in Gulf countries, resulting in disruptions exceeding 12 million barrels per day in oil and gas liquids supplies, figures that highlight the scale of vulnerability facing energy markets.

Despite these challenges, Azour emphasized that Gulf nations have made notable progress in strengthening resilience. Enhanced coordination across infrastructure networks, including ports, pipelines, and even military bases, has helped lay the groundwork for maintaining stability and restoring investor confidence.

Looking ahead, he stressed that defining acceptable levels of security will be critical in shaping investment decisions. “The structure of future alliances and infrastructure development will be determined by how these threats evolve,” he said.

Azour concluded that both economic security frameworks and traditional defense systems are undergoing a period of stress testing amid rising global uncertainty. Unlike previous regional crises, the current conflict has had far-reaching consequences, extending beyond the Middle East to impact regions as distant as Europe and New Zealand.

In a related context, Abdulaziz bin Sager, founder and chairman of the Gulf Research Center, highlighted unpredictability in U.S. foreign policy as a major regional concern, warning that it poses risks to stability and security.