How Economic Shifts Will Shape GCC Markets

Risks are tilted to the drawback. In the occasion of a prolonged dispute, the existing influence on the region will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the area: not only to weather shocks, however to restore more resilient economies with stronger macroeconomic fundamentals, innovate and improve governance, invest in facilities, and increase employment-creating sectors," said.

With peace and the right action, nations can construct the organizations, capabilities and competitive sectors that produce opportunities for individuals." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for commercial policy federal government actions to increase tactical service activity as a driver of economic development and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted industrial 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 critical requirement for strong organizations and careful targeting of policies. "As nations face the heavy toll of today conflict, it is essential to also not lose sight of the work needed for long-lasting peace and success," said.

Navigating Capital Strategies in a 2026 Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the finance profession. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We expect energy flows, tourism and financier sentiment to gradually normalise as war interruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a substantial step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take time, but the danger of a recession-inducing oil cost spike has declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their failure to avoid the disturbance to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to agreement by 2.4% compared to a 0.2% decline predicted formerly. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is significant. Saudi GDP data 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 disruption hit late in the quarter.

Middle East Stock Trading Trends in 2026

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses since the start of the conflict. May information reveal regional production nearly halved 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 helped prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in numerous years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. On the other hand, oil prices have been volatile, reducing listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil costs to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ enables a steady increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Versus this backdrop, the UAE will speed up the building and construction of a brand-new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven largely by improved domestic need. They remain below long-run averages, with weak export orders and price pressures from greater material and transportation 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 healing over the rest of the decade.