How Industrial Shifts Can Transform GCC Markets

Risks are slanted to the downside. In case of a prolonged conflict, the current effect on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a stark tip of the work ahead for the area: not just to weather shocks, however to rebuild more resistant economies with stronger macroeconomic principles, innovate and enhance governance, invest in infrastructure, and enhance employment-creating sectors," stated.

With peace and the right action, countries can develop the organizations, abilities and competitive sectors that create chances for individuals." With this long-lasting vision in mind, the report takes a close appearance at the region's potential for commercial policy federal government actions to increase strategic company activity as a motorist of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the crucial need for strong organizations and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is very important to likewise not lose sight of the work required for long-lasting peace and prosperity," stated.

Middle East Stock Trading Patterns in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared directly for the finance occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We expect energy flows, tourist and financier belief to slowly normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a significant action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil rate spike has actually declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to avoid the interruption to regional shipping, war-driven facilities damage and tourist 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% decline forecasted previously. We anticipate 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 financial damage sustained in the last couple of months is considerable. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed 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 disturbance hit late in the quarter.

Future Regional Market Outlook

Aside from Oman, all GCC producers along with Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the conflict. Might data show local production nearly 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 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 several years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. Oil costs have been volatile, relieving listed below $85 per barrel as the interim agreement was revealed.

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

The May PMI studies reported output growth reaching its strongest level in three months, driven mainly by enhanced domestic demand. Nevertheless, they remain listed below long-run averages, with weak export orders and price pressures from greater product and transport costs 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 progressive healing over the remainder of the years.