The Future Investment Landscape of Arabia

Dangers are slanted to the drawback. In the event of a prolonged dispute, the current effects on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the region: not only to weather shocks, but to rebuild more resilient economies with more powerful macroeconomic principles, innovate and improve governance, buy facilities, and improve employment-creating sectors," stated.

With peace and the right action, nations can build the organizations, capabilities and competitive sectors that create opportunities for individuals." With this long-lasting vision in mind, the report takes a close appearance at the area's potential for industrial policy government actions to increase tactical business activity as a driver of economic growth and job creation.

ANSR July GCC PRs 50DR+

Governments in the region have embraced industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, however the outcomes have actually been mixed. The report highlights the important need for strong institutions and mindful targeting of policies. "As countries deal with the heavy toll of today dispute, it is crucial to also not lose sight of the work required for long-lasting peace and prosperity," said.

Advancing Non-Oil Growth through Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared directly for the financing occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourist and financier sentiment to slowly normalise as war disturbances decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a significant action towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take time, however the threat of a recession-inducing oil price spike has actually declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher than the decline 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 avoid the disruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decrease forecasted previously. We expect Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The financial damage incurred in the last few months is substantial. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering 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 disruption hit late in the quarter.

The Future Investment Climate of the GCC

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered substantial oil and gas production losses considering that the start of the conflict. Might data reveal regional production nearly 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+

We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in numerous years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Oil prices have been unpredictable, reducing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect 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 once trade normalises. Versus this backdrop, the UAE will speed up the building of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven mostly by enhanced domestic need. They remain below long-run averages, with weak export orders and price pressures from higher material and transportation costs are a typical style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the rest of the years.