Top Foreign Capital Prospects in the GCC Region

Threats are tilted to the disadvantage. In case of a prolonged dispute, the current effect on the area will be compoundedthrough elevated energy and food rates, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain pointer of the work ahead for the area: not only to weather shocks, but to rebuild more resistant economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and improve employment-creating sectors," stated.

With peace and the right action, nations can develop the organizations, abilities and competitive sectors that develop opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the area's capacity for commercial policy government actions to increase strategic organization activity as a motorist of financial growth and job development.

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Governments in the region have adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the results have actually been mixed. The report highlights the important need for strong organizations and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is very important to also not lose sight of the work needed for lasting peace and success," stated.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the financing occupation. The GCC economy faces a marked contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy flows, tourism and investor sentiment to gradually normalise as war interruptions decrease.

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The interim contract between the United States and Iran is a considerable step towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely require time, however the risk of a recession-inducing oil cost spike has declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to avoid the disruption to local shipping, war-driven facilities damage and tourist losses.

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

The economic damage incurred in the last few months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace because 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.

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Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered comprehensive oil and gas production losses since the start of the conflict. Might data reveal regional production almost cut in half from pre-war levels, with the decline 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 actually helped avoid an even bigger plunge in output.

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Nonetheless, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil prices have been unstable, relieving listed below $85 per barrel as the interim agreement was announced.

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

The May PMI surveys reported output development reaching its strongest level in 3 months, driven mostly by enhanced domestic need. However, they stay listed below long-run averages, with weak export orders and price pressures from greater product and transport expenses are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the rest of the decade.