Positioning Middle East Portfolios for 2026 Trends

Threats are slanted to the disadvantage. In the event of an extended dispute, the present effect on the area will be compoundedthrough raised energy and food prices, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a plain tip of the work ahead for the region: not only to weather shocks, however to rebuild more resilient economies with stronger macroeconomic principles, innovate and enhance governance, invest in infrastructure, and increase employment-creating sectors," stated.

With peace and the right 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 area's potential for industrial policy federal government actions to increase tactical company activity as a driver of economic growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have embraced industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, but the outcomes have actually been blended. The report highlights the crucial requirement for strong organizations and careful targeting of policies. "As countries face the heavy toll of the present dispute, it is very important to likewise not lose sight of the work required for lasting peace and success," stated.

Emerging Equity Market Patterns for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the financing profession. The GCC economy faces a significant contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourism and investor sentiment to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a substantial step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil cost spike has actually decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected three months ago, 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), 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 failure to avoid the disturbance to local shipping, war-driven infrastructure damage and tourism losses.

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

The financial damage incurred in the last couple of months is considerable. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate because 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 struck late in the quarter.

Upcoming GCC Financial Outlook

Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the conflict. May data show local production nearly halved 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in numerous years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. Oil rates have actually been unstable, relieving below $85 per barrel as the interim agreement 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 for a steady boost in its output towards the 5mn barrel each day production target once trade normalises. Against this backdrop, the UAE will accelerate the building of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in three months, driven largely by enhanced domestic need. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from higher product and transport costs are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the rest of the decade.