Why Industrial Shifts Will Transform Arabian Markets

Threats are slanted to the drawback. In case of an extended conflict, the existing effect on the area will be compoundedthrough elevated energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a stark suggestion of the work ahead for the region: not just to weather shocks, however to reconstruct more resilient economies with stronger macroeconomic basics, innovate and improve governance, invest in infrastructure, and improve employment-creating sectors," stated.

With peace and the best action, countries can construct the organizations, capabilities and competitive sectors that develop chances for people." With this long-lasting vision in mind, the report takes a close look at the area's potential for commercial policy government actions to increase strategic company activity as a motorist of financial growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have actually been blended. The report highlights the important requirement for strong institutions and cautious targeting of policies. "As nations deal with the heavy toll of today conflict, it is necessary to also not lose sight of the work needed for long-lasting peace and success," stated.

Key International Capital Avenues for the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the finance occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran contract to end the war. We expect energy flows, tourism and financier belief to slowly normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a significant action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, but the threat 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 predicted 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 decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their inability 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 ago, with GDP forecast to contract by 2.4% compared to a 0.2% decline forecasted formerly. We expect Oman and Saudi Arabia to be the least negatively 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 significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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 interruption hit late in the quarter.

2026 GCC Economic Forecasts

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the dispute. Might information reveal regional 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 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 decline in a number of decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a significantly depressed base. Meanwhile, oil costs have been unpredictable, easing below $85 per barrel as the interim arrangement 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+ permits for a gradual increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven largely by improved domestic demand. They stay below long-run averages, with weak export orders and cost pressures from higher material and transportation costs are a common style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the remainder of the years.