Driving Non-Oil Success via Strategic Diversification

Risks are tilted to the disadvantage. In the occasion of an extended conflict, the existing impacts on the area will be compoundedthrough elevated energy and food rates, 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 only to weather shocks, but to rebuild more resilient economies with stronger macroeconomic principles, innovate and enhance governance, purchase infrastructure, and increase employment-creating sectors," said.

With peace and the right action, nations can develop the institutions, abilities and competitive sectors that develop chances for individuals." With this long-term vision in mind, the report takes a close look at the area's capacity for industrial policy federal government actions to increase tactical business activity as a chauffeur of financial growth and job development.

ANSR July GCC PRs 50DR+

Governments in the region have embraced commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been mixed. The report highlights the critical need for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of the present conflict, it is important to likewise not forget the work required for lasting peace and success," said.

Key Equity Capital Strategies for GCC Investors

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the finance profession. The GCC economy deals with a marked contraction this year pending information of the US-Iran arrangement to end the war. We expect energy flows, tourist and investor sentiment to gradually normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a substantial step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take some time, but the risk 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 decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their failure to prevent the interruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to agreement by 2.4% compared to a 0.2% decline forecasted formerly. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage incurred in the last couple of months is substantial. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace because the Covid pandemic. On a seasonally adjusted basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz interruption struck late in the quarter.

International Capital Opportunities within the GCC

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered comprehensive oil and gas production losses given that the start of the conflict. Might information show regional production almost halved 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 actually assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. On the other hand, oil prices have been unpredictable, alleviating listed below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil rates to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a gradual boost in its output towards the 5mn barrel daily production target when trade normalises. Against this backdrop, the UAE will speed up the construction of a brand-new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in 3 months, driven mainly by enhanced domestic demand. However, they remain below long-run averages, with weak export orders and rate pressures from greater product and transportation costs are a common style. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the rest of the decade.