Key Capital Diversification for 2026

Dangers are tilted to the drawback. In case of an extended conflict, the current effect on the region will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark reminder of the work ahead for the area: not only to weather shocks, however to restore more resilient economies with stronger macroeconomic principles, innovate and enhance governance, buy facilities, and increase employment-creating sectors," stated.

With peace and the right action, nations can develop 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 industrial policy government actions to increase tactical service activity as a chauffeur of financial growth and task production.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, however the results have been mixed. The report highlights the critical need for strong institutions and mindful targeting of policies. "As countries deal with the heavy toll of the present dispute, it is essential to also not lose sight of the work needed for long-lasting peace and success," said.

Driving Economic Success through Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the finance occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy flows, tourist and financier belief to slowly normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a significant step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take some time, but the danger of a recession-inducing oil price spike has decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected three months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to prevent the interruption to local shipping, war-driven facilities damage and tourism 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 impacted by the fallout from the dispute, 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 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace considering that 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.

The 2026 Business Climate of the GCC

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered substantial oil and gas production losses because the start of the conflict. May data show regional production nearly 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate 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 mostly by normalisation from a badly depressed base. Oil prices have actually been unstable, reducing below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil rates to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ allows for a gradual boost in its output towards the 5mn barrel each day production target as soon as trade normalises. Against this background, the UAE will accelerate the construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven mainly by enhanced domestic need. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from greater product and transportation costs are a typical theme. In general, 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 rest of the decade.