According to the Ministry of Finance and National Economy’s Bahrain Economic Quarterly Report for Q1 2026, real GDP at constant prices contracted 3.8% year-on-year, ending a five-year run of quarterly growth. The decline was almost entirely due to a 37.2% fall in oil activities. Restrictions on maritime traffic through the Strait of Hormuz constrained export capacity, and scheduled maintenance at key facilities added further pressure.
However, non-oil GDP at constant prices still expanded 2.2% year-on-year. That confirms domestic demand and services activity stayed resilient despite regional conflict. Non-oil activities now account for 90.1% of real GDP, with nine of thirteen non-oil sectors recording positive growth in the quarter.
At current prices, total GDP fell 2.7% year-on-year, driven by a 31.1% decline in oil activities. By contrast, non-oil sectors posted a 1.9% rise, per ministry data.
Non-oil engines hold as oil shock hits headline growth
Financial and insurance activities remained the single largest contributor to GDP. They represent 19.7% of real output and posted an 8.6% annual growth rate in Q1 2026. Manufacturing followed with a 14.6% GDP share, while public administration contributed 9.0% and construction 7.0%. That breadth of non-oil contribution is notable.
Oil-related activity, by contrast, represented less than 10% of real output in the quarter. That small share magnified the macro impact of the sector’s sharp contraction. One analyst observation captures the quarter cleanly: Bahrain’s headline growth dropped, but its economic core kept moving.
The financial and insurance segment’s 8.6% growth, sitting atop a near 20% GDP share, positions Bahrain as one of the Gulf’s more diversified financial centres. That matters most when hydrocarbon volatility is elevated. Meanwhile, the Ministry of Finance and National Economy data suggest government spending and project activity continue to underpin the non-oil core through public administration and construction.
How much geopolitical risk does the non-oil base absorb?
The quarterly report notes strong performance in January and February 2026. Conditions deteriorated in March as the US–Iran conflict escalated. Direct Iranian attacks on Bahrain disrupted energy activity and amplified restrictions on shipping through the Strait of Hormuz, cutting oil exports further.
Non-oil sectors — financial services, manufacturing and construction — stayed in expansion throughout. That signals domestic and regional demand for Bahrain’s service offerings remained intact. This is also a useful comparison point for the broader Gulf: as the UAE PMI rebound earlier in the year showed, Gulf non-oil momentum has been broadly durable even under external shocks.
For investors, the Q1 data offer a practical stress test of Bahrain’s diversification push. Real GDP contracted in the quarter. Yet the non-oil economy still grew and now generates more than nine-tenths of output. That mix shows the kingdom remains exposed to energy trade disruptions, while its growth story increasingly rests on financial intermediation, light industry and public-sector-anchored services.
Looking ahead, institutional investors and policymakers will watch whether Bahrain non-oil GDP can maintain mid-single-digit growth as oil activity normalises, and whether the financial and insurance sector’s 19.7% share and 8.6% growth rate in Q1 2026 mark a durable trend or a high-water mark in a volatile geopolitical year.
Quick answers
Bahrain’s non-oil GDP grew 2.2% year-on-year in Q1 2026 at constant prices, according to the Ministry of Finance and National Economy’s Bahrain Economic Quarterly Report.
Overall real GDP fell 3.8% year-on-year, almost entirely because oil activities dropped 37.2%, driven by Strait of Hormuz shipping restrictions linked to the US–Iran conflict and scheduled maintenance at key facilities.
Non-oil activities accounted for 90.1% of Bahrain’s real GDP in Q1 2026, with financial and insurance services alone contributing 19.7% of total output.
