Key Industrial Shifts in 2026

Threats are tilted to the drawback. In the occasion of an extended dispute, the present effect on the area will be compoundedthrough raised energy and food prices, declining trade, tourist and remittances, increased financial 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 resilient economies with more powerful macroeconomic principles, innovate and enhance governance, buy facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can construct the institutions, abilities and competitive sectors that develop opportunities for individuals." With this long-lasting vision in mind, the report takes a close look at the region's capacity for commercial policy government actions to increase tactical company activity as a chauffeur of financial development and job creation.

ANSR July GCC PRs 50DR+

Governments in the region have embraced commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the results have been mixed. The report highlights the vital need for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of the present conflict, it is crucial to also not lose sight of the work needed for lasting peace and success," stated.

Top Foreign Investment Prospects in the GCC Region

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

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a significant action towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely take some time, but the danger of a recession-inducing oil cost spike has actually decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to prevent the interruption to regional shipping, war-driven facilities damage and tourism losses.

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

The economic damage incurred in the last couple of months is significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate since 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 disturbance hit late in the quarter.

Navigating Wealth Diversification in a Global Economy

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered comprehensive oil and gas production losses considering that the start of the conflict. Might data show local production nearly cut in half from pre-war levels, with the decrease 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 avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Oil prices have been unstable, alleviating listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil rates to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ enables for a progressive boost in its output towards the 5mn barrel each day production target when trade normalises. Against this backdrop, the UAE will accelerate the construction of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in 3 months, driven largely by improved domestic demand. They stay below long-run averages, with weak export orders and cost pressures from greater material and transport costs are a common theme. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the remainder of the years.