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Threats are slanted to the disadvantage. In the event of an extended dispute, the current influence on the region will be compoundedthrough elevated energy and food rates, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a plain tip of the work ahead for the area: not just to weather shocks, however to restore more resistant economies with stronger macroeconomic fundamentals, innovate and improve governance, purchase facilities, and enhance employment-creating sectors," stated.

With peace and the right action, countries can build the institutions, capabilities and competitive sectors that develop chances for people." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for industrial policy federal government actions to increase strategic service activity as a driver of economic development and job development.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the outcomes have been blended. The report highlights the critical requirement for strong organizations and cautious targeting of policies. "As nations face the heavy toll of the present conflict, it is very important to likewise not forget the work required for lasting peace and success," stated.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly for the finance profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy flows, tourist and investor belief to slowly normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim arrangement 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 require time, but the danger of a recession-inducing oil price spike has actually declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months back, 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), greater than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick 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 3 months earlier, with GDP projection to agreement 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 economic damage incurred in the last few months is significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed 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 disturbance struck late in the quarter.

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Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered comprehensive oil and gas production losses because the start of the dispute. May information show local production nearly cut in half 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate 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 largely by normalisation from a seriously depressed base. Oil costs have actually been volatile, relieving below $85 per barrel as the interim contract 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+ enables a gradual boost in its output towards the 5mn barrel per day production target when trade normalises. Versus this background, the UAE will speed up the construction of a brand-new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven mostly by enhanced domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and cost pressures from greater product and transport costs are a common style. In general, we expect 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.