Strategic Economic Shifts for the Future

Dangers are slanted to the disadvantage. In case of an extended conflict, the current effect on the area will be compoundedthrough raised energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain suggestion of the work ahead for the region: not just to weather shocks, but to reconstruct more resistant economies with stronger macroeconomic basics, innovate and improve governance, invest in facilities, and enhance employment-creating sectors," said.

With peace and the best action, countries can develop the institutions, capabilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close look at the region's capacity for commercial policy federal government actions to increase tactical service activity as a driver of financial development and task development.

ANSR July GCC PRs 50DR+

Governments in the region have adopted commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the critical requirement for strong institutions and careful targeting of policies. "As countries deal with the heavy toll of today dispute, it is essential to likewise not lose sight of the work required for long-lasting peace and prosperity," stated.

The 2026 Investment Landscape of the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared straight for the financing occupation. The GCC economy faces a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy circulations, tourism and investor sentiment to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim agreement 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 require time, but the threat of a recession-inducing oil rate spike has actually decreased. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to prevent the disturbance to regional shipping, war-driven infrastructure damage and tourist losses.

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

The economic damage incurred in the last few months is significant. Saudi GDP data for Q1 revealed 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 disruption struck late in the quarter.

Essential Economic Shifts for the Future

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses since the start of the dispute. May information show regional production nearly 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 helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. Meanwhile, oil prices have been unstable, relieving listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil prices to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a gradual increase in its output towards the 5mn barrel per day production target once trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in three months, driven mostly by improved domestic demand. Nevertheless, they remain listed below long-run averages, with weak export orders and cost pressures from higher product and transport expenses are a typical 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 steady recovery over the rest of the years.