Positioning GCC Investments for 2026 Shifts

Threats are tilted to the drawback. In the occasion of a prolonged conflict, the present impacts on the area will be compoundedthrough elevated energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark tip of the work ahead for the area: not just to weather shocks, however to restore more resistant economies with stronger macroeconomic principles, innovate and improve governance, invest in infrastructure, and enhance employment-creating sectors," said.

With peace and the right action, nations can construct the organizations, abilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close look at the area's capacity for commercial policy federal government actions to increase strategic company activity as a motorist of financial development and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the outcomes have been mixed. The report highlights the important requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is essential to likewise not lose sight of the work needed for long-lasting peace and prosperity," said.

Key International Capital Avenues for the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial 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 contract to end the war. We anticipate energy flows, tourist and financier sentiment to slowly normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a significant step towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil price spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, 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 stand apart as the hardest hit, owing to their inability to avoid the disruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP projection to agreement by 2.4% compared to a 0.2% decline predicted previously. We expect 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 few months is significant. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed 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 interruption hit late in the quarter.

How Economic Diversification Can Shape Arabian Markets

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered comprehensive oil and gas production losses since the start of the conflict. May data show regional 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to agreement 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 seriously depressed base. Oil costs have been unpredictable, easing below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive boost in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this background, the UAE will speed up the construction of a brand-new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven largely by improved domestic need. They remain listed below long-run averages, with weak export orders and cost pressures from higher material and transportation expenses are a common style. 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 decade.