Assessing Regional Investment Potential for 2026

Threats are tilted to the drawback. In case of an extended conflict, the present effects on the area will be compoundedthrough elevated energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain tip of the work ahead for the region: not just to weather shocks, however to restore more resistant economies with more powerful macroeconomic fundamentals, innovate and improve governance, purchase facilities, and improve employment-creating sectors," said.

With peace and the best action, nations can develop the institutions, abilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close appearance at the region's potential for industrial policy federal government actions to increase tactical business activity as a chauffeur of financial development and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the results have been blended. The report highlights the vital requirement for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is essential to also not forget the work needed for long-lasting peace and prosperity," stated.

Middle East Equity Market Trends for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the financing profession. The GCC economy faces a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor sentiment to slowly normalise as war disruptions go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a significant step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil rate spike has actually 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 anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their failure to avoid the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease predicted previously. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage incurred 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 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.

Driving Non-Oil Growth through Global Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered comprehensive 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, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil rates have been unstable, relieving listed below $85 per barrel as the interim agreement 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+ permits a progressive increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Versus this backdrop, the UAE will speed up the building of a new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mainly by enhanced domestic need. Nevertheless, they remain listed 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 healing over the rest of the decade.