Foreign Capital Prospects within the Middle East

Risks are slanted to the drawback. In case of a prolonged dispute, the present impacts on the area will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a stark pointer of the work ahead for the region: not just to weather shocks, however to restore more resilient economies with stronger macroeconomic basics, innovate and enhance governance, purchase facilities, and enhance employment-creating sectors," said.

With peace and the ideal action, nations can develop the organizations, capabilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the area's potential for industrial policy government actions to increase tactical organization activity as a motorist of financial growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been mixed. The report highlights the critical requirement for strong institutions and cautious targeting of policies. "As countries deal with the heavy toll of today conflict, it is necessary to also not forget the work needed for long-lasting peace and prosperity," said.

Navigating Capital Diversification for a Global Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the financing profession. The GCC economy faces a significant contraction this year pending information of the US-Iran contract to end the war. We expect energy circulations, tourist and financier sentiment to slowly normalise as war interruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a substantial step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, however the danger of a recession-inducing oil cost spike has actually declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 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 out as the hardest hit, owing to their failure to prevent the interruption to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to contract by 2.4% compared to a 0.2% decrease forecasted formerly. 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 sustained in the last few months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate since 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.

Navigating Capital Diversification for a 2026 Economy

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the conflict. Might data reveal local production almost cut in half from pre-war levels, with the decrease 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 assisted prevent 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 numerous decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil rates have been unpredictable, relieving below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil costs to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits a progressive boost in its output towards the 5mn barrel each day production target when trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in three months, driven mainly by improved domestic demand. However, they stay listed below long-run averages, with weak export orders and cost pressures from higher product and transportation costs are a common theme. 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.