How Economic Shifts Will Shape GCC Markets

Risks are slanted to the disadvantage. In case of an extended dispute, the current effects on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain tip of the work ahead for the region: not only to weather shocks, however to rebuild more durable economies with stronger macroeconomic fundamentals, innovate and enhance governance, purchase infrastructure, and enhance employment-creating sectors," stated.

With peace and the best action, countries can construct the organizations, capabilities and competitive sectors that produce chances for individuals." With this long-term vision in mind, the report takes a close take a look at the region's capacity for commercial policy federal government actions to increase strategic organization activity as a motorist of financial development and job development.

ANSR July GCC PRs 50DR+

Federal governments in the region have embraced commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have been blended. The report highlights the crucial need for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of today conflict, it is necessary to also not lose sight of the work required for long-lasting peace and prosperity," stated.

Essential Industrial Diversification for the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the finance occupation. The GCC economy faces a significant contraction this year pending information of the US-Iran agreement to end the war. We expect energy circulations, tourist and investor sentiment to slowly normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a substantial step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take some time, but the danger of a recession-inducing oil cost spike has actually decreased. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, and 3.1% in 2027.

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

Our 2026 outlook for the GCC is weaker than three months back, with GDP projection to contract by 2.4% compared to a 0.2% decline forecasted formerly. We anticipate 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 considerable. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed since 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 disturbance hit late in the quarter.

Optimizing Wealth Strategies in a 2026 Economy

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the dispute. May information 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+

However, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in several decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. On the other hand, oil costs have been unstable, reducing listed below $85 per barrel as the interim agreement was announced.

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

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mostly by enhanced domestic demand. However, they stay below long-run averages, with weak export orders and rate pressures from greater product and transport expenses are a common theme. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the remainder of the years.