The 2026 Investment Climate in the GCC

Risks are slanted to the drawback. In case of a prolonged dispute, the current effect on the area will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark suggestion of the work ahead for the region: not just to weather shocks, but to restore more resistant economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and boost employment-creating sectors," said.

With peace and the right action, countries can build the organizations, capabilities and competitive sectors that produce chances for people." With this long-lasting vision in mind, the report takes a close appearance at the area's potential for commercial policy federal government actions to increase strategic company activity as a motorist of economic development and task creation.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the results have actually been mixed. The report highlights the crucial need for strong organizations and careful targeting of policies. "As nations deal with the heavy toll of the present dispute, it is essential to likewise not lose sight of the work needed for lasting peace and prosperity," stated.

Top Foreign Capital Prospects for the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the financing occupation. The GCC economy faces a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy flows, tourism and investor sentiment to slowly normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement 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 take some time, but the threat of a recession-inducing oil cost spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted three 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), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to avoid the disturbance to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease projected previously. We expect 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 economic damage incurred in the last few months is substantial. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed given that 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 interruption hit late in the quarter.

Future-Proofing Regional Portfolios against 2026 Trends

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered substantial oil and gas production losses since the start of the dispute. Might information show local production almost cut in half 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 avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Meanwhile, oil rates have actually been volatile, alleviating listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady boost in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this background, the UAE will accelerate the building of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in three months, driven largely by enhanced domestic demand. However, they stay listed below long-run averages, with weak export orders and price pressures from greater material and transportation costs are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady recovery over the remainder of the decade.