Positioning Regional Investments against 2026 Trends

Threats are slanted to the downside. In case of a prolonged conflict, the existing influence on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a stark suggestion of the work ahead for the area: not just to weather shocks, but to restore more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in infrastructure, and enhance employment-creating sectors," stated.

With peace and the right action, nations can construct the institutions, capabilities and competitive sectors that develop opportunities for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for commercial policy federal government actions to increase tactical business activity as a chauffeur of economic growth and task development.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually adopted industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the critical need for strong organizations and cautious targeting of policies. "As countries deal with the heavy toll of today dispute, it is crucial to likewise not forget the work needed for lasting peace and prosperity," stated.

Evaluating Regional Investment Resilience in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared straight for the finance profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy circulations, tourism and financier sentiment to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

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

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher 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 local shipping, war-driven facilities damage and tourist losses.

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

The economic damage sustained in the last few months is significant. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate 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 disruption struck late in the quarter.

How Economic Shifts Can Shape GCC Markets

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 show regional production nearly 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Oil prices have been volatile, relieving 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 baseline, as the UAE's departure from OPEC+ permits a progressive increase in its output towards the 5mn barrel per day production target when trade normalises. Versus this background, the UAE will accelerate the building and construction of a new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven mainly by improved domestic demand. They stay below long-run averages, with weak export orders and cost pressures from greater material and transport costs are a common theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive healing over the rest of the years.