The Future Investment Landscape of the GCC

Threats are slanted to the disadvantage. In case of an extended dispute, the current effect on the area will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark pointer of the work ahead for the region: not just to weather shocks, however to rebuild more resilient economies with more powerful macroeconomic basics, innovate and improve governance, buy facilities, and boost employment-creating sectors," stated.

With peace and the ideal action, nations can develop the institutions, capabilities and competitive sectors that develop chances for individuals." With this long-term vision in mind, the report takes a close take a look at the region's potential for commercial policy government actions to increase tactical business activity as a motorist of economic development and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the important need for strong organizations and cautious targeting of policies. "As nations deal with the heavy toll of today conflict, it is essential to likewise not forget the work needed for lasting peace and prosperity," stated.

Top Foreign Investment Prospects in the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared directly for the finance occupation. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We anticipate energy flows, tourism 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 considerable action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take time, but the threat of a recession-inducing oil price spike has declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months back, 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 decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their inability to avoid the disturbance to regional shipping, war-driven infrastructure damage and tourism 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 projected previously. We expect Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage sustained in the last few months is considerable. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace because 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 interruption hit late in the quarter.

Assessing Regional Market Potential for 2026

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the dispute. May information reveal local production nearly 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+

Nevertheless, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Meanwhile, oil rates have been volatile, relieving listed below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables 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 brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven mainly by improved domestic need. They stay below long-run averages, with weak export orders and price pressures from greater material 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% growth pre-war) and a steady recovery over the remainder of the years.