Mastering Investment Strategies for a Global Economy

Threats are tilted to the drawback. In case of an extended conflict, the current effects on the area will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark reminder of the work ahead for the region: not just to weather shocks, but to reconstruct more resilient economies with stronger macroeconomic basics, innovate and enhance governance, buy facilities, and enhance employment-creating sectors," said.

With peace and the ideal action, nations can construct the institutions, abilities and competitive sectors that create opportunities for individuals." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for commercial policy federal government actions to increase strategic organization activity as a motorist of economic growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have embraced commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the crucial need for strong organizations and careful targeting of policies. "As countries face the heavy toll of the present dispute, it is important to likewise not lose sight of the work required for lasting peace and prosperity," said.

2026 Regional Financial Forecasts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We expect energy circulations, tourist and financier belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a substantial step towards reaching a full-blown deal. 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 declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, 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 first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to prevent the interruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage incurred in the last few months is substantial. Saudi GDP data for Q1 revealed growth 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 disruption hit late in the quarter.

Foreign Investment Prospects across the Middle East

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered substantial oil and gas production losses since the start of the conflict. Might data show local production nearly 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 actually helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in numerous years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil rates have actually been unpredictable, alleviating listed below $85 per barrel as the interim arrangement was announced.

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 a gradual increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Versus this background, the UAE will accelerate the building and construction of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in three months, driven mainly by improved domestic demand. They stay listed below long-run averages, with weak export orders and price pressures from greater material and transportation expenses 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 progressive healing over the remainder of the years.