The Future Business Landscape of the GCC

Risks are tilted to the disadvantage. In the occasion of a prolonged conflict, the existing effect on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourist 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 resilient economies with more powerful macroeconomic fundamentals, innovate and enhance governance, buy infrastructure, and boost employment-creating sectors," stated.

With peace and the best action, nations can construct the organizations, abilities and competitive sectors that develop opportunities for people." With this long-lasting vision in mind, the report takes a close look at the area's capacity for industrial policy federal government actions to increase tactical company activity as a chauffeur of financial development and job production.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced industrial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the crucial requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is essential to likewise not lose sight of the work required for lasting peace and prosperity," stated.

Future-Proofing Regional Investments for 2026 Shifts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the finance occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor sentiment to slowly normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a substantial action towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take time, however the threat of a recession-inducing oil cost spike has decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months earlier, 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 first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to avoid the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

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

The financial damage sustained in the last few months is substantial. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate 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 interruption struck late in the quarter.

Foreign Investment Prospects across the Middle East

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered comprehensive oil and gas production losses given that the start of the conflict. May data reveal local production nearly halved 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. On the other hand, oil rates have been unstable, alleviating below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil costs to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ allows for a steady boost in its output towards the 5mn barrel daily production target when trade normalises. Versus this backdrop, the UAE will speed up the construction of a new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in 3 months, driven largely by improved domestic need. Nevertheless, they remain listed below long-run averages, with weak export orders and rate pressures from higher product 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 progressive healing over the remainder of the decade.