Key International Investment Avenues for the GCC Region

Dangers are tilted to the downside. In case of a prolonged conflict, the current effect on the area will be compoundedthrough elevated energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not only to weather shocks, however to restore more durable economies with stronger macroeconomic basics, innovate and enhance governance, purchase infrastructure, and boost employment-creating sectors," said.

With peace and the best action, countries can construct the institutions, abilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the region's capacity for commercial policy government actions to increase strategic organization activity as a motorist of economic growth and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, but the outcomes have actually been mixed. The report highlights the critical need for strong institutions and careful targeting of policies. "As countries face the heavy toll of the present dispute, it is important to likewise not forget the work needed for lasting peace and success," said.

2026 Middle Eastern Market Forecasts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending information of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor belief to gradually normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a considerable step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take 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 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), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their inability to prevent the disturbance to local shipping, war-driven infrastructure 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% decrease projected previously. We anticipate 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 considerable. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate since 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 disruption hit late in the quarter.

Accelerating Economic Growth via Global Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. Might information show local 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil prices have been unstable, alleviating listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil costs to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady increase in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will speed up the building of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven mainly by enhanced domestic demand. They remain listed below long-run averages, with weak export orders and price pressures from higher product and transport costs are a common theme. Overall, 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 remainder of the decade.