Driving Economic Success via Global Diversification

Risks are tilted to the disadvantage. In case of an extended dispute, the present effect on the area will be compoundedthrough elevated energy and food rates, declining trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the area: not only to weather shocks, however to reconstruct more resilient economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and improve employment-creating sectors," stated.

With peace and the right action, countries can develop the institutions, capabilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close look at the area's capacity for industrial policy government actions to increase tactical service activity as a motorist of economic growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been blended. The report highlights the critical need for strong institutions and careful targeting of policies. "As nations face the heavy toll of the present conflict, it is important to likewise not lose sight of the work required for lasting peace and success," said.

How Economic Shifts Can Shape GCC Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the financing occupation. The GCC economy deals with a significant contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy flows, tourism and investor sentiment to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a significant action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, however the threat of a recession-inducing oil cost spike has decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher 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 failure to avoid the interruption to regional shipping, war-driven facilities damage and tourism 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 forecasted formerly. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to broaden this year.

The financial damage sustained in the last couple of months is considerable. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace given 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 disturbance hit late in the quarter.

Securing GCC Portfolios against 2026 Trends

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered substantial oil and gas production losses because the start of the dispute. May information reveal regional 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 prevent an even bigger 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 largely by normalisation from a seriously depressed base. Oil costs have actually been unpredictable, relieving below $85 per barrel as the interim agreement was announced.

In the medium term, we expect oil prices to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel daily production target once trade normalises. Versus this background, the UAE will speed up the building and construction of a new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven largely by improved domestic need. They remain below long-run averages, with weak export orders and rate pressures from higher product and transport expenses are a typical style. In general, we anticipate 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.