Assessing Regional Market Resilience for 2026

Risks are slanted to the drawback. In the event of a prolonged conflict, the existing effects on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain reminder of the work ahead for the region: not just to weather shocks, but to restore more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in infrastructure, and enhance employment-creating sectors," said.

With peace and the right action, nations can construct the organizations, abilities and competitive sectors that create chances for people." With this long-term vision in mind, the report takes a close look at the region's capacity for commercial policy government actions to increase tactical organization activity as a driver of economic growth and task production.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned enterprises, but the results have been mixed. The report highlights the important requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present conflict, it is very important to also not lose sight of the work required for long-lasting peace and success," stated.

Accelerating Industrial Growth via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the financing occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourism and investor sentiment to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US 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 time, but the threat of a recession-inducing oil rate spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 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 hit, owing to their failure to prevent the disturbance to regional shipping, war-driven facilities damage and tourism losses.

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

The economic damage sustained in the last few months is considerable. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate because 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.

Key International Investment Prospects for the GCC Market

Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered extensive oil and gas production losses because the start of the dispute. Might information show regional production almost halved 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 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 decrease in a number of decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. Oil rates have actually been unstable, reducing below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil costs to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel daily production target when trade normalises. Against this background, the UAE will speed up the construction of a new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in three months, driven mostly by enhanced domestic need. However, they remain listed below long-run averages, with weak export orders and price pressures from greater product and transportation expenses are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the remainder of the years.