Essential Economic Expansion for 2026

Threats are slanted to the downside. In case of an extended conflict, the current effects on the region will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the region: not just to weather shocks, however to rebuild more resilient economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and improve employment-creating sectors," stated.

With peace and the ideal action, nations can develop the institutions, capabilities and competitive sectors that develop opportunities for individuals." With this long-term vision in mind, the report takes a close appearance at the area's potential for commercial policy government actions to increase tactical business activity as a driver of financial growth and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced 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 important need for strong institutions and mindful targeting of policies. "As nations face the heavy toll of today conflict, it is essential to likewise not forget the work required for lasting peace and prosperity," stated.

Essential Capital Shifts in the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region 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 expect energy circulations, tourism and investor sentiment to gradually normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a substantial action towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil price spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to prevent the interruption to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease projected formerly. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace considering that 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 struck late in the quarter.

2026 Regional Financial Projections

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses because the start of the dispute. May data show local production nearly halved from pre-war levels, with the decline 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast 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 badly depressed base. On the other hand, oil rates have actually been volatile, alleviating listed below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil prices 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 when trade normalises. Versus this background, the UAE will accelerate the building of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in 3 months, driven largely by enhanced domestic demand. However, they remain listed below long-run averages, with weak export orders and price pressures from greater product and transportation costs are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the rest of the years.