Future Regional Financial Forecasts

Threats are tilted to the drawback. In case of an extended dispute, the current impacts on the region will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark suggestion of the work ahead for the area: not just to weather shocks, however to restore more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in facilities, and enhance employment-creating sectors," stated.

With peace and the best action, countries can construct the organizations, abilities and competitive sectors that create opportunities for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for industrial policy federal government actions to increase tactical organization activity as a driver of economic growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, but the outcomes have been blended. The report highlights the crucial requirement for strong institutions and careful targeting of policies. "As countries face the heavy toll of the present conflict, it is essential to also not lose sight of the work needed for lasting peace and success," stated.

Global Investment Opportunities across the Middle East

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the finance profession. The GCC economy faces a marked contraction this year pending information of the US-Iran arrangement to end the war. We anticipate energy flows, tourist and investor sentiment to slowly normalise as war disturbances diminish.

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 complete go back to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil cost spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, 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 stick out as the hardest struck, owing to their inability to avoid the interruption to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to contract by 2.4% compared to a 0.2% decrease predicted previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred in the last couple of months is substantial. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate because the Covid pandemic. On a seasonally changed 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.

Future Business Climate in Arabia

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

ANSR July GCC PRs 50DR+

Nevertheless, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. On the other hand, oil prices have actually been unstable, relieving listed 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 standard, as the UAE's departure from OPEC+ enables a gradual boost in its output towards the 5mn barrel per day production target when trade normalises. Against this backdrop, the UAE will speed up the construction of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven mostly by enhanced domestic demand. Nevertheless, they remain below long-run averages, with weak export orders and cost 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% growth pre-war) and a gradual recovery over the remainder of the years.