Key Capital Diversification in the Future

Threats are slanted to the downside. In the occasion of a prolonged dispute, the present effect on the region will be compoundedthrough elevated energy and food rates, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain tip of the work ahead for the area: not only to weather shocks, but to restore more durable economies with stronger macroeconomic basics, innovate and enhance governance, buy infrastructure, and enhance employment-creating sectors," stated.

With peace and the ideal action, nations can build the institutions, abilities and competitive sectors that develop opportunities for people." With this long-term vision in mind, the report takes a close take a look at the area's potential for commercial policy government actions to increase tactical business activity as a motorist of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the outcomes have actually been blended. The report highlights the critical need for strong organizations and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is crucial to also not forget the work needed for lasting peace and success," stated.

Critical Equity Capital Insights for Regional Growth

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the financing profession. The GCC economy faces a significant contraction this year pending information of the US-Iran contract to end the war. We anticipate energy flows, tourist and investor belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a considerable 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 threat of a recession-inducing oil price spike has declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to avoid the disruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decline projected previously. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The financial damage sustained in the last few 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 since 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 struck late in the quarter.

How Economic Shifts Will Transform Arabian Markets

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. May information reveal local production almost cut in half 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil costs have been unstable, easing below $85 per barrel as the interim contract 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 for a progressive boost in its output towards the 5mn barrel each day production target once trade normalises. Against this background, the UAE will speed up the building and construction of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven mainly by improved domestic need. However, they stay listed below long-run averages, with weak export orders and cost pressures from greater material and transportation costs 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 steady recovery over the rest of the decade.