2026 Business Landscape of Arabia

Risks are slanted to the downside. In the occasion of a prolonged dispute, the present influence on the region will be compoundedthrough elevated energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the area: not only to weather shocks, but to restore more resistant economies with more powerful macroeconomic basics, innovate and enhance governance, invest in infrastructure, and increase employment-creating sectors," said.

With peace and the best action, nations can develop the organizations, abilities and competitive sectors that produce chances for people." 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 tactical company activity as a motorist of economic development and job creation.

ANSR July GCC PRs 50DR+

Governments in the area have adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the vital need for strong organizations and cautious targeting of policies. "As countries face the heavy toll of today dispute, it is important to also not forget the work required for long-lasting peace and success," stated.

Future Regional Market Projections

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the financing occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We expect energy circulations, tourist and financier sentiment to gradually normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a substantial step towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil price spike has actually decreased. International 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 forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to prevent the disturbance to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease forecasted formerly. 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 expanding 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 interruption hit late in the quarter.

International Capital Opportunities across the Middle East

Aside from Oman, all GCC manufacturers 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 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 larger 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 decrease in several years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Oil costs have been volatile, easing below $85 per barrel as the interim contract was announced.

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

The May PMI surveys reported output development reaching its strongest level in 3 months, driven mainly by enhanced domestic demand. They stay below long-run averages, with weak export orders and price pressures from greater product and transport costs are a typical theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive recovery over the rest of the decade.