Accelerating Non-Oil Growth through Global Diversification

Risks are tilted to the drawback. In case of a prolonged dispute, the existing effect on the area will be compoundedthrough raised energy and food rates, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the area: not just to weather shocks, however to reconstruct more durable economies with stronger macroeconomic basics, innovate and improve governance, invest in facilities, and boost employment-creating sectors," stated.

With peace and the right action, countries can build the institutions, abilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the region's capacity for commercial policy government actions to increase strategic organization activity as a driver of financial development and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the crucial requirement for strong institutions and careful targeting of policies. "As nations face the heavy toll of today dispute, it is necessary to also not forget the work needed for lasting peace and success," stated.

Global Investment Opportunities within the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the financing occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy flows, tourism and financier sentiment to gradually normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a significant action towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely require time, however the risk of a recession-inducing oil cost spike has actually declined. International GDP is expected 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 forecasted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to prevent the disturbance to local shipping, war-driven infrastructure damage and tourist losses.

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

The financial damage incurred in the last couple of months is significant. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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 interruption hit late in the quarter.

Positioning Regional Portfolios against 2026 Trends

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses because the start of the dispute. May information show 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 assisted avoid an even larger 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 decline in several decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a significantly depressed base. Meanwhile, oil costs have been unpredictable, relieving listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ allows for a steady boost in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven mostly by enhanced domestic demand. They stay listed 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 remainder of the decade.