Positioning Middle East Portfolios against 2026 Shifts

Threats are tilted to the disadvantage. In case of an extended conflict, the existing effects on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain suggestion of the work ahead for the area: not just to weather shocks, but to restore more durable economies with stronger macroeconomic basics, innovate and improve governance, purchase facilities, and boost employment-creating sectors," stated.

With peace and the best action, nations can construct the organizations, abilities and competitive sectors that produce chances for individuals." With this long-term vision in mind, the report takes a close take a look at the area's capacity for industrial policy government actions to increase tactical business activity as a motorist of economic growth and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, but the results have actually been mixed. The report highlights the crucial need for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is necessary to also not lose sight of the work required for lasting peace and success," said.

Top International Investment Avenues for the GCC Region

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

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a substantial step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil rate spike has actually declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 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 apart as the hardest hit, owing to their failure to avoid the disturbance to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease projected previously. We expect 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 sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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 disruption hit late in the quarter.

Strategic Industrial Diversification in the Future

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the conflict. Might data show local production almost halved 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 prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several decades. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a significantly depressed base. Oil prices have been volatile, relieving listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil rates to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this background, the UAE will accelerate the construction of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mainly by enhanced domestic need. Nevertheless, they remain listed below long-run averages, with weak export orders and cost pressures from greater product and transportation expenses 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 gradual recovery over the rest of the decade.