2026 Regional Market Outlook

Risks are tilted to the downside. In case of an extended conflict, the existing influence on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark pointer of the work ahead for the area: not just to weather shocks, but to reconstruct more resistant economies with more powerful macroeconomic basics, innovate and enhance governance, purchase facilities, and increase employment-creating sectors," said.

With peace and the right action, nations can build the organizations, capabilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close take a look at the region's capacity for industrial policy federal government actions to increase tactical company activity as a driver of economic development and job creation.

ANSR July GCC PRs 50DR+

Governments in the region have adopted industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the results have actually been mixed. The report highlights the vital need for strong institutions and mindful targeting of policies. "As countries face the heavy toll of the present dispute, it is essential to likewise not lose sight of the work needed for lasting peace and prosperity," said.

Optimizing Wealth Diversification for a Global Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the financing profession. The GCC economy deals with a marked contraction this year pending information of the US-Iran arrangement to end the war. We anticipate energy flows, tourism and financier belief to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a significant step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil price spike has decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to prevent the disturbance to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP forecast to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage incurred in the last few months is substantial. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed because the Covid pandemic. On a seasonally adjusted basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz disruption struck late in the quarter.

Future-Proofing Middle East Portfolios for 2026 Trends

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered substantial oil and gas production losses given that the start of the conflict. Might information reveal regional production nearly cut in half from pre-war levels, with the decrease deepening relative to March and April. Rerouting efforts, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have actually helped prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Meanwhile, oil costs have actually been unpredictable, alleviating below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil costs to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady boost in its output towards the 5mn barrel daily production target as soon as trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in three months, driven mainly by improved domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and rate pressures from greater material and transportation costs are a common style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive healing over the rest of the years.