Bahrain’s non-oil economy continued to expand in the first quarter of 2026 despite the sharp disruption to oil exports caused by restrictions on maritime traffic through the Strait of Hormuz.

Non-oil activities grew 2.2% year-on-year at constant prices in the first quarter, even as overall real GDP contracted 3.8%, according to the Bahrain Economic Quarterly Report for Q1 2026 released by the Ministry of Finance and National Economy.

The headline contraction was driven primarily by the oil sector, which shrank 37.2% during the quarter. The ministry said restrictions on maritime traffic through the Strait of Hormuz affected Bahrain’s export capacity, while scheduled maintenance also contributed to the decline in oil activity.

The quarterly data also show that the impact of the disruption was concentrated toward the end of the quarter. 

Bahrain’s economy recorded strong performance in January and February before being affected in March by the conflict involving Iran, the ministry said.

At current prices, GDP declined 2.7% year-on-year, with oil activities falling 31.1%, while non-oil activities increased 1.9%.

The non-oil sector accounted for 90.1% of Bahrain’s real GDP in the first quarter, with nine of the 13 non-oil economic activities recording positive growth.

Financial and insurance activities, the largest contributor to GDP, grew 8.6% year-on-year and accounted for 19.7% of total GDP. Manufacturing represented 14.6%, while public administration and construction accounted for 9% and 7%, respectively.

Meanwhile, the remaining non-oil activities each contributed between 2% and 5% of total real GDP, reflecting the Kingdom’s diversified economic structure.

The report also showcases a 2.6% YoY increase in total inward FDI in Q1 2026, bringing total FDI stock to BHD17.6 billion.

Bahrain continues to achieve significant progress across a range of international economic and developmental indicators, reflecting the resilience of its economy and ongoing enhancements to the business environment, the report said. Bahrain ranked 1st globally in 67 indicators, is among the top five globally in 120 indicators, and among the top 10 globally in 206 indicators.

The Kingdom ranked 1st globally in Public-Private Partnerships in the World Competitiveness Ranking 2026, published by the International Institute for Management Development (IMD). Bahrain also secured the 1st place globally in Islamic Finance Governance, as per the State of the Global Islamic Economy Report 2025/2026 released by DinarStandard. 

Furthermore, Bahrain ranked 1st globally for Attracting Investments, in the Chandler Good Government Index 2026, published by the Chandler Governance Group. Additionally, Bahrain advanced 3 positions in the ICT Development Index 2026, issued by the International Telecommunication Union (ITU), ranking 6th globally among 159 economies.