Positioning Middle East Portfolios against 2026 Shifts

Threats are tilted to the disadvantage. In the event of a prolonged conflict, the current influence on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain pointer of the work ahead for the area: not only to weather shocks, but to reconstruct more resilient economies with more powerful macroeconomic fundamentals, innovate and improve governance, buy facilities, and enhance employment-creating sectors," said.

With peace and the best action, countries can develop the organizations, abilities and competitive sectors that develop opportunities for individuals." With this long-lasting vision in mind, the report takes a close look at the area's potential for commercial policy federal government actions to increase strategic organization activity as a motorist of financial development and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the results have been mixed. The report highlights the important need for strong institutions and cautious targeting of policies. "As countries deal with the heavy toll of the present conflict, it is necessary to also not lose sight of the work required for long-lasting peace and success," said.

Emerging Stock Market Trends in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the financing occupation. The GCC economy deals with a marked contraction this year pending information of the US-Iran arrangement to end the war. We expect energy flows, tourist and investor belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a significant action towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil rate spike has actually decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months back, 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), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to avoid the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decline forecasted previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding 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 interruption hit late in the quarter.

Future Investment Climate of the GCC

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered substantial oil and gas production losses given that the start of the conflict. Might data reveal regional production almost halved from pre-war levels, with the decrease 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+

Nevertheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. Oil rates have been unstable, alleviating below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil rates to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a gradual 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 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. They stay below long-run averages, with weak export orders and price pressures from higher material and transport expenses are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the rest of the decade.