Essential Economic Expansion in 2026

Threats are tilted to the drawback. In case of an extended conflict, the existing influence on the region will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a stark reminder of the work ahead for the area: not only to weather shocks, but to restore more durable economies with more powerful macroeconomic fundamentals, innovate and enhance governance, invest in facilities, and boost employment-creating sectors," said.

With peace and the ideal action, nations can develop the organizations, abilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close look at the region's potential for commercial policy federal government actions to increase tactical business activity as a driver of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the results have actually been mixed. The report highlights the vital need for strong institutions and mindful targeting of policies. "As countries deal with the heavy toll of today conflict, it is essential to likewise not forget the work required for long-lasting peace and success," stated.

Key Stock Market Insights for GCC Investors

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We anticipate energy circulations, tourist and financier belief to slowly normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

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

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to avoid the disruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, 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 adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage incurred in the last few months is significant. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed considering that the Covid pandemic. On a seasonally adjusted 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.

Future-Proofing Middle East Investments for 2026 Shifts

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered extensive oil and gas production losses given that the start of the conflict. Might information show regional production almost cut in half 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 prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

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

In the medium term, we anticipate oil prices to be somewhat 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 as soon as trade normalises. Against this backdrop, the UAE will accelerate the building of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in three months, driven mostly by enhanced domestic demand. They remain below long-run averages, with weak export orders and rate pressures from greater product and transportation costs are a common style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady recovery over the rest of the decade.