This study employs a flexible spatial smooth transition regression (FSTR) for dynamic panel data to investigate the asymmetric and nonlinear effects of institutional quality and financial stability on trade flexibility and economic resilience across 19 MENA countries over the period 2000–2024. The main innovations of the paper are threefold. First, it introduces a dynamic hybrid spatial weight matrix that incorporates business cycle synchronization, technological spillovers, and institutional similarity, with time-varying weights. Second, it estimates an FSTR model with two endogenous institutional thresholds, enabling the identification of three distinct institutional regimes. Third, it applies network analysis to economic resilience using degree, betweenness, and eigenvector centrality measures. The results reveal two institutional thresholds: –2.15 and +0.35. In the weak institutional regime (5 countries), corruption exerts a strong detrimental effect on trade flexibility (–0.892), while institutional quality shows no significant impact. In the strong institutional regime (7 countries), the negative effect of corruption diminishes to –0.231, and institutional quality becomes the most important driver of resilience with a coefficient of 0.678. Institutional spillovers account for 38.7% of total spatial effects, outperforming trade-based (24.3%) and geographic (18.9%) spillovers.