2026 Investment Landscape in Arabia

Dangers are slanted to the downside. In the occasion of a prolonged conflict, the current influence on the region will be compoundedthrough elevated energy and food costs, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the area: not only to weather shocks, however to reconstruct more resistant economies with stronger macroeconomic basics, innovate and enhance governance, buy facilities, and boost employment-creating sectors," stated.

With peace and the ideal action, countries can develop the institutions, capabilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close appearance at the area's potential for industrial policy federal government actions to increase tactical company activity as a driver of financial development and task development.

ANSR July GCC PRs 50DR+

Governments in the region have adopted industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the results have actually been blended. The report highlights the critical requirement for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is very important to likewise not lose sight of the work needed for lasting peace and success," said.

Accelerating Non-Oil Growth through Global Diversification

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 deals with a significant 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 go away.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a substantial action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil price spike has decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their inability to prevent the interruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease projected formerly. We anticipate Oman and Saudi Arabia to be the least adversely 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 growth 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 disruption hit late in the quarter.

2026 Regional Market Outlook

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered substantial oil and gas production losses because the start of the dispute. Might data show regional production almost 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 helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. On the other hand, oil costs have been unpredictable, easing listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a progressive boost in its output towards the 5mn barrel daily production target when trade normalises. Against this background, the UAE will accelerate the building of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in three months, driven mainly by improved domestic demand. They stay listed below long-run averages, with weak export orders and price pressures from greater material and transport costs 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 gradual healing over the rest of the years.