Assessing GCC Investment Potential for 2026

Risks are tilted to the drawback. In the event of a prolonged conflict, the existing effect on the region will be compoundedthrough raised energy and food prices, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not just to weather shocks, but to restore more durable economies with stronger macroeconomic fundamentals, innovate and enhance governance, invest in infrastructure, and boost employment-creating sectors," stated.

With peace and the ideal action, countries can develop the organizations, abilities and competitive sectors that create chances for people." With this long-term vision in mind, the report takes a close appearance at the area's potential for industrial policy government actions to increase tactical service activity as a motorist of economic growth and task development.

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the results have actually been blended. The report highlights the critical requirement for strong organizations and mindful targeting of policies. "As countries face the heavy toll of today conflict, it is necessary to likewise not lose sight of the work needed for lasting peace and success," said.

Future-Proofing Regional Portfolios against 2026 Trends

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly for the financing profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran contract to end the war. We expect energy circulations, tourism and investor sentiment to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a considerable step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil rate spike has declined. International 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 forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), greater than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to prevent the disturbance to regional shipping, war-driven infrastructure damage and tourism losses.

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

The financial damage sustained in the last couple of months is significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace since 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.

Mastering Capital Diversification in a 2026 Economy

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered substantial oil and gas production losses because the start of the dispute. May information 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several years. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Oil costs have been unpredictable, alleviating listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil rates to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables for a progressive increase in its output towards the 5mn barrel daily production target once trade normalises. Against this backdrop, the UAE will speed up the construction of a brand-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 three months, driven largely by enhanced domestic need. They remain listed below long-run averages, with weak export orders and rate pressures from greater material and transportation costs are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the remainder of the decade.