Critical Stock Market Insights for Regional Investors

Threats are slanted to the drawback. In the event of a prolonged dispute, the existing effect on the area will be compoundedthrough elevated energy and food rates, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the area: not only to weather shocks, but to reconstruct more resistant economies with more powerful macroeconomic fundamentals, innovate and improve governance, purchase facilities, and increase employment-creating sectors," said.

With peace and the ideal action, nations can develop the institutions, abilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close appearance at the region's capacity for industrial policy government actions to increase strategic business activity as a motorist of economic growth and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have adopted commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned business, however the outcomes have actually been mixed. The report highlights the important need for strong organizations and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is very important to also not lose sight of the work required for long-lasting peace and prosperity," said.

How Industrial Diversification Can Shape GCC Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the financing occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement 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 contract between the United States and Iran is a considerable step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely require time, but the risk of a recession-inducing oil price spike has actually decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, and 3.1% in 2027.

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

Our 2026 outlook for the GCC is weaker than three months back, with GDP projection to contract by 2.4% compared to a 0.2% decrease predicted 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 economic damage sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed development 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 interruption hit late in the quarter.

Emerging Stock Market Trends in 2026

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered substantial oil and gas production losses since the start of the dispute. May data show regional production almost 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+

Nevertheless, we forecast GCC oil sector output to contract 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 seriously depressed base. On the other hand, oil rates have been unstable, relieving 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 standard, as the UAE's departure from OPEC+ enables for a gradual increase in its output towards the 5mn barrel per day production target when trade normalises. Against this background, the UAE will accelerate the construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mainly by improved domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and rate pressures from greater material and transportation expenses are a typical theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady recovery over the remainder of the years.