Key Foreign Investment Prospects for the GCC Region

Risks are tilted to the disadvantage. In case of a prolonged conflict, the existing influence on the region will be compoundedthrough raised energy and food rates, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current 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 basics, innovate and enhance governance, buy infrastructure, and enhance employment-creating sectors," stated.

With peace and the best action, nations can develop the organizations, abilities and competitive sectors that create chances for individuals." With this long-lasting vision in mind, the report takes a close take a look at the region's potential for industrial policy federal government actions to increase strategic company activity as a motorist of financial growth and task development.

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the results have actually been blended. The report highlights the important requirement for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is essential to likewise not forget the work needed for long-lasting peace and prosperity," stated.

GCC Equity Market Trends in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly 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 expect energy flows, tourist and financier sentiment to slowly normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a substantial step towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil cost spike has decreased. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We forecast 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 stand apart as the hardest hit, 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 back, with GDP forecast to contract by 2.4% compared to a 0.2% decline projected formerly. We expect Oman and Saudi Arabia to be the least adversely affected by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage incurred in the last few months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening 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 interruption hit late in the quarter.

How Economic Diversification Will Shape GCC Markets

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the conflict. Might data reveal local production nearly halved 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 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 decline in numerous decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Meanwhile, oil rates have been unstable, easing below $85 per barrel as the interim agreement was announced.

In the medium term, we expect oil rates to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ enables for a steady increase in its output towards the 5mn barrel daily production target when trade normalises. Versus this backdrop, the UAE will accelerate the construction of a brand-new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mostly by improved domestic demand. However, they stay below long-run averages, with weak export orders and rate pressures from higher material and transport expenses are a typical theme. 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 healing over the rest of the decade.