Key Equity Market Strategies for Regional Investors

Risks are tilted to the drawback. In case of a prolonged dispute, the existing effect on the region will be compoundedthrough elevated energy and food rates, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark reminder of the work ahead for the area: not only to weather shocks, but to reconstruct more resilient economies with stronger macroeconomic fundamentals, innovate and improve governance, purchase infrastructure, and improve employment-creating sectors," said.

With peace and the right action, countries can build the institutions, capabilities and competitive sectors that produce chances for people." With this long-lasting vision in mind, the report takes a close take a look at the region's capacity for commercial policy federal government actions to increase tactical business activity as a motorist of financial growth and task production.

ANSR July GCC PRs 50DR+

Governments in the area have embraced commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, but the outcomes have been mixed. The report highlights the important need for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of today conflict, it is necessary to likewise not forget the work needed for lasting peace and prosperity," stated.

Advancing Non-Oil Success via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We expect energy flows, tourism and financier belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a considerable step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil cost spike has actually declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months earlier, 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), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their failure to avoid the disruption 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 contract by 2.4% compared to a 0.2% decrease projected formerly. 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 sustained in the last few months is substantial. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate considering that 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.

Future GCC Financial Projections

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses since the start of the conflict. May information reveal 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in several years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a severely 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 prices to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ allows for a steady increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this backdrop, 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 strongest level in 3 months, driven largely by enhanced domestic need. They remain below long-run averages, with weak export orders and price pressures from higher product and transport costs are a typical theme. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the remainder of the years.