The Middle East and North Africa region has long represented a persistent epicenter of complex and evolving security challenges; however, in recent decades, terrorism has become a decisive catalyst intensifying structural instability across this landscape. Rather than remaining a peripheral issue, terrorism functions as an active strategic force undermining state capabilities at foundational levels. Comprehending regional dynamics necessitates looking beyond conventional military countermeasures to examine the destructive synergy between institutional state fragility and extremist strategies. Designed to scrutinize this reciprocal interaction, this study employs a qualitative methodology grounded in documentary content analysis and a systematic literature review concerning terrorism, state fragility, and regional geopolitics to evaluate multifaceted impacts on MENA security, political, and economic structures. Findings reveal that the ramifications of terrorism are inherently twofold and intertwined. Politically, terrorism fuels crises of state legitimacy by subverting the monopoly on the legitimate use of violence and undermining international credibility; consequently, governments reallocate disproportionate resources toward security sectors, disrupting institutional efficiency in developmental service delivery and deepening state–society fractures. Economically, terrorism targets non-oil sectors, driving stagnation, elevating geopolitical risk, accelerating foreign direct investment flight, and generating regional spillover effects. Crucially, economic distress creates fertile ground for radical organizations, reinforcing recruitment cycles across extremist networks. In conclusion, terrorism has established a mutually reinforcing relationship with state fragility across the region. Achieving sustainable security therefore requires adopting comprehensive strategic frameworks that simultaneously restore functional state capacities and foster economic diversification, ultimately eroding the underlying structural incentives that continually facilitate extremist mobilization and recruitment.