Future Regional Market Projections

Risks are tilted to the disadvantage. In the occasion of an extended dispute, the current influence on the region will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the region: not only to weather shocks, but to rebuild more resilient economies with stronger macroeconomic principles, innovate and enhance governance, purchase infrastructure, and boost employment-creating sectors," said.

With peace and the ideal action, countries can build the institutions, capabilities and competitive sectors that produce opportunities for people." With this long-term vision in mind, the report takes a close look at the area's potential for industrial policy government actions to increase strategic organization activity as a motorist of financial growth and job production.

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 business, but the outcomes have actually been blended. The report highlights the crucial requirement for strong institutions and careful targeting of policies. "As nations deal with the heavy toll of today dispute, it is very important to also not forget the work required for long-lasting peace and success," stated.

Mastering Investment Strategies in a Global Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy circulations, tourist and financier belief to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a significant action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take time, however the threat of a recession-inducing oil cost spike has declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher 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 inability to prevent the disruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decline predicted formerly. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last couple of 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 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.

International Capital Prospects within the Middle East

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered extensive oil and gas production losses because the start of the dispute. Might data show regional production nearly 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Meanwhile, oil prices have been unstable, reducing below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil prices to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a progressive boost in its output towards the 5mn barrel daily production target when trade normalises. Against this backdrop, the UAE will speed up the construction of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven mostly by improved domestic need. They remain below long-run averages, with weak export orders and cost pressures from greater material and transportation costs are a typical style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive healing over the remainder of the decade.