Analyzing Regional Investment Resilience for 2026

Dangers are slanted to the downside. In case of an extended dispute, the current effects on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the region: not just to weather shocks, but to rebuild more resilient economies with stronger macroeconomic basics, innovate and improve governance, purchase infrastructure, and boost employment-creating sectors," said.

With peace and the best action, nations can develop the organizations, abilities and competitive sectors that create chances for individuals." With this long-term vision in mind, the report takes a close take a look at the area's potential for commercial policy federal government actions to increase tactical company activity as a driver of financial growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, but the outcomes have actually been blended. The report highlights the important need for strong organizations and mindful targeting of policies. "As nations face the heavy toll of the present dispute, it is very important to also not forget the work needed for long-lasting peace and success," said.

Assessing Regional Market Resilience in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared straight for the finance profession. The GCC economy deals with a marked contraction this year pending information of the US-Iran agreement to end the war. We expect energy flows, tourism and investor belief to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a considerable action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil rate spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months back, 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), greater 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 inability to prevent the disturbance to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decline predicted previously. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the dispute, with both economies continuing to expand this year.

The economic damage sustained in the last few months is considerable. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate considering 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.

How Economic Diversification Can Transform GCC Markets

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses since the start of the dispute. Might information show local production almost cut in half from pre-war levels, with the decline 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 assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we anticipate GCC oil sector output to agreement 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 significantly depressed base. On the other hand, oil prices have been volatile, reducing listed below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil costs to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Against this background, the UAE will accelerate the building 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 mainly by improved domestic need. However, they remain listed below long-run averages, with weak export orders and price pressures from higher product and transport costs are a typical theme. Overall, 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 remainder of the decade.