Future GCC Market Outlook

Risks are tilted to the drawback. In the event of a prolonged conflict, the current influence on the region will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a plain pointer of the work ahead for the area: not just to weather shocks, but to restore more durable economies with more powerful macroeconomic principles, innovate and enhance governance, invest in infrastructure, and boost employment-creating sectors," said.

With peace and the right action, countries can develop the institutions, abilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close appearance at the region's capacity for industrial policy federal government actions to increase strategic service activity as a driver of economic growth and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, but the results have been blended. The report highlights the critical requirement for strong institutions and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is necessary to also not lose sight of the work needed for long-lasting peace and success," stated.

Future-Proofing GCC Investments against 2026 Shifts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the finance occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy flows, tourism and financier belief to slowly normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a considerable step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil cost spike has 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 anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to avoid the interruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease predicted previously. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred in the last few months is considerable. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate because 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 interruption struck late in the quarter.

Top Foreign Investment Avenues in the GCC Region

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the dispute. May information reveal local production almost 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 actually helped prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Oil costs have actually been unpredictable, relieving listed below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil prices to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits a gradual boost in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mostly by improved domestic demand. However, they remain 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 rest of the decade.