Driving Non-Oil Growth via Global Diversification

Dangers are tilted to the drawback. In case of a prolonged dispute, the present influence on the area will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the area: not only to weather shocks, but to reconstruct more resistant economies with more powerful macroeconomic basics, innovate and enhance governance, buy infrastructure, and improve employment-creating sectors," stated.

With peace and the ideal action, countries can develop the organizations, capabilities and competitive sectors that create chances for individuals." With this long-lasting vision in mind, the report takes a close appearance at the area's capacity for commercial policy government actions to increase strategic organization activity as a motorist of economic growth and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually 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 blended. The report highlights the critical requirement for strong institutions and cautious targeting of policies. "As nations face the heavy toll of today conflict, it is important to likewise not forget the work needed for long-lasting peace and success," stated.

Advancing Non-Oil Success through Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the financing occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy circulations, tourist and financier sentiment to slowly normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a substantial action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil cost spike has actually declined. Worldwide 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 forecasted 3.6% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to prevent the disturbance to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decline predicted previously. We expect Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage incurred in the last couple of months is considerable. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed given that 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 disturbance hit late in the quarter.

The 2026 Investment Landscape of the GCC

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses since the start of the conflict. Might data reveal regional production almost cut in half from pre-war levels, with the decline deepening relative to March and April. Rerouting efforts, consisting of by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have actually helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to agreement 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 largely by normalisation from a seriously depressed base. Oil prices have been unpredictable, reducing below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil costs to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables for a progressive increase in its output towards the 5mn barrel per day production target when trade normalises. Versus this backdrop, the UAE will speed up the building and construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mainly by enhanced domestic need. However, they remain listed below long-run averages, with weak export orders and price pressures from greater material and transport expenses are a common style. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the rest of the decade.