Future GCC Market Forecasts

Dangers are slanted to the downside. In case of an extended dispute, the existing influence on the area will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not just to weather shocks, but to restore more durable economies with stronger macroeconomic basics, innovate and enhance governance, invest in infrastructure, and boost employment-creating sectors," said.

With peace and the ideal action, nations can develop the institutions, capabilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close appearance at the area's potential for commercial policy government actions to increase strategic business activity as a motorist of financial growth and job creation.

ANSR July GCC PRs 50DR+

Governments in the region have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the outcomes have been mixed. The report highlights the critical requirement for strong institutions and careful targeting of policies. "As countries deal with the heavy toll of the present dispute, it is very important to also not forget the work needed for lasting peace and success," stated.

Advancing Industrial Growth through Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the financing profession. The GCC economy faces a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy circulations, tourist and financier sentiment to gradually normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a significant step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely require time, but the danger 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 forecasted three months earlier, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their inability to prevent the disturbance to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to agreement by 2.4% compared to a 0.2% decline forecasted 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 financial damage incurred in the last couple of months is considerable. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate 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 disturbance hit late in the quarter.

Top International Capital Avenues for the GCC Region

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered substantial oil and gas production losses considering that the start of the dispute. Might data show local production nearly halved from pre-war levels, with the decline 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 avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in numerous years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. Oil costs have been unpredictable, reducing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil costs to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ permits for a gradual increase in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will speed up the construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in 3 months, driven mainly by improved domestic demand. They stay below long-run averages, with weak export orders and cost pressures from higher material and transport expenses are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the remainder of the decade.