Key Capital Expansion for the Future

Threats are tilted to the disadvantage. In the event of an extended conflict, the current effects on the area will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a plain reminder of the work ahead for the area: not just to weather shocks, however to reconstruct more resistant economies with stronger macroeconomic basics, innovate and improve governance, purchase infrastructure, and improve employment-creating sectors," stated.

With peace and the ideal action, countries can construct the institutions, abilities and competitive sectors that develop chances for individuals." With this long-lasting vision in mind, the report takes a close appearance at the area's potential for industrial policy federal government actions to increase tactical organization activity as a motorist of financial growth and task development.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the outcomes have been mixed. The report highlights the important requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of today conflict, it is very important to also not forget the work required for lasting peace and success," stated.

Accelerating Non-Oil Success via Global Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the finance occupation. The GCC economy faces a marked contraction this year pending details of the US-Iran contract to end the war. We expect energy flows, tourism and investor sentiment to gradually normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a considerable action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, however the risk of a recession-inducing oil cost spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 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 hit, owing to their failure to prevent the interruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP projection to agreement by 2.4% compared to a 0.2% decrease projected formerly. We anticipate 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 data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed considering 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 disruption hit late in the quarter.

Future-Proofing Middle East Investments against 2026 Shifts

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered extensive oil and gas production losses since the start of the conflict. Might information show regional production almost halved from pre-war levels, with the decrease 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. On the other hand, oil rates have been volatile, easing below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil costs to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ enables a steady boost in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this background, the UAE will speed up the building of a new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in 3 months, driven mainly by improved domestic demand. They stay below long-run averages, with weak export orders and cost pressures from higher product and transport expenses are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the rest of the years.