Oman’s quiet advantage

The World Bank’s April 2026 Economic Update for the Middle East, North Africa, Afghanistan and Pakistan arrives at a moment of acute uncertainty. A conflict centred around the Gulf has effectively closed the Strait of Hormuz — through which roughly a fifth of global oil once flowed — sending Brent crude past $112 a barrel and forcing sharp downward revisions to regional growth forecasts. Amidst this turbulence, Oman offers a compelling case study: not of immunity to shocks, but of how measured economic strategy can build resilience over time.
WHERE OMAN STANDS
The World Bank projects Oman’s real GDP growth at 2.4 per cent for 2026, down from 2.6 per cent in 2025. Its current account is expected to swing into a surplus of 3.4 per cent of GDP, partly reflecting elevated oil prices. Inflation, however, is forecast to jump from 0.9 to 4.1 per cent as higher energy and food costs filter through.
One reason Oman has absorbed the shock comparatively well is geography. Unlike economies whose exports are entirely routed through the Strait of Hormuz, Oman can partially divert oil shipments through ports on the Arabian Sea. The strategic investment in Al Duqm — a port and special economic zone positioned outside the Gulf on the Indian Ocean coast — now looks particularly far-sighted. The World Bank’s own analysis finds that special economic zones in the region are associated with measurably higher economic activity in surrounding areas, with spillover effects strongest within 40 kilometres.
THE CHALLENGES TO CONFRONT
Yet Oman faces structural headwinds that predate the current crisis. Diversification remains incomplete: oil and gas rents still accounted for roughly 20 per cent of GDP in 2021. While that figure has fallen over the decades, the report underlines a broader point — when oil revenues can be disrupted overnight, even partial dependence constitutes systemic risk.
The labour market is a persistent concern. Firm-level data suggest that productivity dispersion within sectors is high, pointing to possible resource misallocation and weak competition. An inadequately educated workforce is cited as a major constraint by a significant share of firms. Bridging the gap between what the education system produces and what the private sector needs remains a central task.
Foreign direct investment, while growing across the Gulf in recent years, is vulnerable to shifts in risk perception that conflicts bring. The report notes that even after a ceasefire, investor confidence can take years to rebuild. Maintaining Oman’s attractiveness as an investment destination during heightened regional uncertainty is a real challenge.
FIVE IDEAS FOR THE NEXT LEVEL
The report’s analytical framework points towards a practical growth agenda built on what Oman already does well.
First, double down on the non-Gulf coast corridor. Duqm, Salalah and surrounding logistics networks should be treated as a genuine second economic axis. Expanding port capacity, refining infrastructure and trade connectivity along the Arabian Sea would reduce concentration risk and position Oman as a gateway between Asia, the Gulf and East Africa.
Second, sharpen the FDI proposition. Oman should focus on sectors where it has natural advantages — petrochemical downstream processing, green hydrogen, logistics and sustainable tourism — and offer investors not just fiscal incentives but a genuinely streamlined regulatory environment. Speed of licensing, transparency of rules and enforceability of contracts matter more to long-horizon investors than tax holidays.
Third, fix the skills pipeline through industry partnership. The report highlights Morocco’s public-private training centres for its automotive sector as a model. In Oman, equivalent partnerships between government, vocational institutions and employers in logistics, energy and hospitality could help close the employment gap. Egypt trained nearly 43,000 tourism workers in 2024 through such collaborations. Oman’s tourism ambitions along Dhofar and the Musandam coast demand similar investment in human capital.
Fourth, build evaluation into every policy. The report is emphatic: industrial policy works best with clear objectives, measurable targets and sunset clauses that are enforced. Many economies in the region have historically introduced industrial policies without specified end dates. Oman should make time-bound, evidence-based policymaking a distinguishing feature of its approach.
Fifth, invest in trade diversification beyond hydrocarbons. Countries that target products with higher complexity and opportunity gain tend to build more durable competitive advantages. Oman’s nascent investments in minerals processing, fisheries value addition and renewable energy components follow this logic. Scaling them requires patient capital, skilled workers and institutions capable of learning from both success and failure.
A FOUNDATION TO BUILD ON
The report ends with a sobering finding: seven years after the onset of conflict, per capita incomes in affected countries are roughly 45 per cent lower than they would have been otherwise — equivalent to losing 35 years of development.
Oman has long understood the value of stability and steady progress. Its tradition of building fundamentals rather than chasing headlines is an asset that compounds over time. The current crisis has tested that approach but also validated it. The task ahead is to sharpen both discipline and ambition: clearer targets, stronger institutions, deeper partnerships with the private sector and a relentless focus on the productive capabilities that will define the Sultanate of Oman’s economy for the next generation.