Advancing Non-Oil Success through Strategic Diversification

Risks are tilted to the disadvantage. In case of an extended dispute, the present influence on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the area: not just to weather shocks, but to restore more resistant economies with more powerful macroeconomic principles, innovate and enhance governance, invest in facilities, and enhance employment-creating sectors," said.

With peace and the right action, nations can develop the organizations, abilities and competitive sectors that develop 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 government actions to increase strategic business activity as a motorist of economic growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have been mixed. The report highlights the crucial requirement for strong organizations and cautious targeting of policies. "As countries face the heavy toll of today dispute, it is necessary to likewise not forget the work required for long-lasting peace and success," said.

Assessing GCC Market Resilience in 2026

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

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a considerable step towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil rate spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, and 3.1% in 2027.

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

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

The economic damage incurred in the last few months is considerable. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate 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 struck late in the quarter.

Key International Capital Avenues for the GCC Region

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses since the start of the dispute. May information reveal local production nearly halved 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 actually assisted prevent 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 several decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil rates have actually been unstable, easing listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil costs to be slightly lower than our pre-war standard, 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. Versus this backdrop, the UAE will accelerate the building of a brand-new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in three months, driven largely by enhanced domestic need. They stay below long-run averages, with weak export orders and price pressures from greater product and transport costs are a common style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the remainder of the decade.