Assessing GCC Investment Potential in 2026

Risks are tilted to the drawback. In case of an extended dispute, the current impacts on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a plain reminder of the work ahead for the area: not only to weather shocks, but to reconstruct more resistant economies with stronger macroeconomic principles, innovate and improve governance, invest in infrastructure, and increase employment-creating sectors," said.

With peace and the ideal action, nations can develop the institutions, abilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close look at the area's potential for industrial policy federal government actions to increase strategic company activity as a motorist of financial development and task development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, however the results have actually been blended. The report highlights the important requirement for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of today dispute, it is essential to also not lose sight of the work needed for long-lasting peace and prosperity," stated.

Future Investment Landscape of Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the financing profession. The GCC economy faces a marked contraction this year pending details of the US-Iran arrangement to end the war. We expect energy circulations, tourist and investor belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a significant step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely require time, but the danger of a recession-inducing oil price spike has decreased. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to prevent the disturbance to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to contract by 2.4% compared to a 0.2% decline predicted formerly. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage incurred in the last couple of months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate because 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 disturbance hit late in the quarter.

Assessing Regional Investment Resilience for 2026

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the dispute. Might information show regional 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 assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of decades. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Meanwhile, oil costs have been unstable, easing below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil rates to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a gradual increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Versus this background, the UAE will speed up the building and construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in three months, driven mostly by enhanced domestic need. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from higher product and transport expenses are a typical theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the remainder of the decade.