Future Regional Financial Outlook

Threats are tilted to the downside. In the occasion of an extended dispute, 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 existing crisis is a plain reminder of the work ahead for the area: not only to weather shocks, however to reconstruct more resistant economies with stronger macroeconomic principles, innovate and improve governance, purchase infrastructure, and increase employment-creating sectors," stated.

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

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, however the outcomes have actually been mixed. The report highlights the vital need for strong institutions and mindful targeting of policies. "As nations face the heavy toll of today conflict, it is important to likewise not forget the work needed for lasting peace and success," said.

Accelerating Industrial Success through Strategic Diversification

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 deals with a significant contraction this year pending details of the US-Iran contract to end the war. We expect energy flows, tourist and investor belief to gradually normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

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

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater 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 inability to avoid the disturbance to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to agreement 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 dispute, with both economies continuing to expand this year.

The economic damage incurred in the last few months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate 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 disruption hit late in the quarter.

How Industrial Shifts Can Transform GCC Markets

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the dispute. Might information reveal regional production almost 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 actually helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. On the other hand, oil rates have actually been unpredictable, easing listed below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a progressive increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this background, the UAE will speed up the construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven largely by enhanced domestic demand. They stay below long-run averages, with weak export orders and price pressures from higher product and transportation costs are a common 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 gradual healing over the rest of the decade.