Positioning Middle East Portfolios against 2026 Shifts

Threats are slanted to the disadvantage. In case of a prolonged conflict, the present effects on the region will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a stark suggestion of the work ahead for the region: not just to weather shocks, but to reconstruct more durable economies with more powerful macroeconomic fundamentals, innovate and enhance governance, invest in infrastructure, and improve employment-creating sectors," said.

With peace and the ideal action, nations can build the institutions, capabilities and competitive sectors that produce chances for individuals." With this long-term vision in mind, the report takes a close look at the area's potential for commercial policy federal government actions to increase tactical organization activity as a chauffeur of economic growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, however the results have actually been blended. The report highlights the critical need for strong organizations and careful targeting of policies. "As countries deal with the heavy toll of the present conflict, it is crucial to likewise not forget the work needed for long-lasting peace and success," stated.

GCC Equity Trading Trends in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared straight for the finance profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy flows, tourist and investor belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a significant step towards reaching a full-blown offer. 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 actually decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 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), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their inability to avoid the interruption 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% decrease projected 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 sustained in the last couple of months is significant. Saudi GDP information 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 struck late in the quarter.

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Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered substantial oil and gas production losses since the start of the conflict. Might data show local 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 helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous years. We then expect a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. Meanwhile, oil costs have been unstable, easing below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel per day production target when trade normalises. Against this backdrop, the UAE will speed up the building of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in 3 months, driven mainly by improved domestic demand. They stay listed below long-run averages, with weak export orders and rate pressures from higher material and transport costs are a typical style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady healing over the rest of the years.