Foreign Investment Opportunities within the Middle East

Risks are slanted to the downside. In case of a prolonged conflict, the present influence on the region will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the region: not only to weather shocks, however to restore more durable economies with stronger macroeconomic principles, innovate and improve governance, buy infrastructure, and improve employment-creating sectors," stated.

With peace and the right action, nations can build the institutions, capabilities and competitive sectors that develop chances for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for commercial policy federal government actions to increase strategic company activity as a motorist of financial development and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, however the results have actually been blended. The report highlights the crucial need for strong institutions and mindful targeting of policies. "As nations face the heavy toll of today dispute, it is essential to also not lose sight of the work required for long-lasting peace and prosperity," stated.

2026 Middle Eastern Market Outlook

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the finance occupation. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We expect energy flows, tourism and financier belief to slowly normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a considerable step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil rate spike has actually decreased. Worldwide 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 anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their inability to prevent the disruption to regional 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% decrease forecasted previously. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last couple of months is considerable. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate because the Covid pandemic. On a seasonally adjusted 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.

Key Economic Diversification in the Future

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered extensive oil and gas production losses since the start of the conflict. May data show local production nearly cut in half 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 helped 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 years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. Oil rates have actually been unpredictable, alleviating below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil rates to be somewhat 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 once trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven largely by improved domestic demand. Nevertheless, they remain listed below long-run averages, with weak export orders and cost pressures from greater product and transport expenses are a typical style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady recovery over the rest of the decade.