Evaluating Regional Market Potential for 2026

Threats are slanted to the downside. In the event of an extended dispute, the existing effects on the region will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the area: not just to weather shocks, however to reconstruct more resilient economies with stronger macroeconomic principles, innovate and enhance governance, invest in facilities, and boost employment-creating sectors," said.

With peace and the ideal action, countries can construct the organizations, capabilities and competitive sectors that create opportunities 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 strategic organization activity as a chauffeur of economic growth and task development.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been mixed. The report highlights the important need for strong organizations and careful targeting of policies. "As nations deal with the heavy toll of today dispute, it is very important to likewise not forget the work required for long-lasting peace and prosperity," said.

2026 Middle Eastern Economic Projections

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared directly for the finance occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourist and investor belief to slowly normalise as war disruptions decrease.

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 go back to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil price spike has actually decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to avoid the disturbance to regional shipping, war-driven infrastructure damage and tourist losses.

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

The economic damage sustained in the last couple of months is significant. Saudi GDP information for Q1 showed 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 hit late in the quarter.

The Future Investment Landscape of the GCC

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the conflict. May information reveal local production almost halved 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 larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement 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 badly depressed base. Oil prices have been volatile, easing below $85 per barrel as the interim contract was announced.

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

The May PMI surveys reported output growth reaching its greatest level in three months, driven mostly by enhanced domestic need. However, they stay below long-run averages, with weak export orders and cost 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.