The year 2025 was a decisive one for the Middle East. Several regional conflicts roiled financial and energy markets, but, for the most part, this upset was short-lived: The former excelled while the latter continued its downward trend. Oil prices continued to tumble over the year, as OPEC doubled down on production, Chinese demand did not recover and an oversupplied market loomed.

A watershed moment in the region was the change of power in Syria, whose economy had been hampered by 13 years of civil war. The new administration, which came into power in January after the ouster of former president Bashar al-Assad, is on a mission to court foreign direct investment and liberalize its economy. Although Syrian President Ahmed Al Sharaa’s administration has convinced Western leaders to lift sanctions on the country, huge challenges remain, including recovering at least $216 billion in damage caused by the war, the World Bank estimates.

Sanam Vakil, director of the Middle East and North Africa Program at Chatham House, said the Middle East in 2025 was defined by low oil prices, tighter financial conditions and elevated geopolitical risk, all of which have constrained growth across much of the region. “While Gulf states have drawn on buffers to manage fiscal pressure and are also pivoting to capitalize on AI, non-oil economies have faced weaker capital inflows, rising debt servicing costs and growing social and employment stresses," Vakil told Al-Monitor.

Pivot away from oil