Accelerating Non-Oil Growth via Global Diversification

Risks are tilted to the disadvantage. In case of an extended conflict, the present effect on the area will be compoundedthrough raised energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not only to weather shocks, however to rebuild more resistant economies with stronger macroeconomic principles, innovate and improve governance, invest in facilities, and enhance employment-creating sectors," said.

With peace and the ideal action, countries can build the organizations, abilities and competitive sectors that develop opportunities for people." With this long-term vision in mind, the report takes a close appearance at the area's capacity for commercial policy government actions to increase tactical organization activity as a driver of economic development and job creation.

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 business, but the results have actually been blended. The report highlights the critical need for strong institutions and mindful 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 needed for lasting peace and prosperity," stated.

Emerging Stock Trading Patterns in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the financing profession. The GCC economy deals with a marked contraction this year pending information of the US-Iran agreement to end the war. We expect energy circulations, tourist and financier belief to gradually normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a substantial action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil price spike has actually declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to prevent the disruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP projection to contract by 2.4% compared to a 0.2% decline forecasted formerly. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage sustained in the last couple of months is considerable. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed 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 disruption hit late in the quarter.

Strategic Industrial Shifts for 2026

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the conflict. May data reveal regional production nearly cut in half from pre-war levels, with the decline 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+

Nonetheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Oil rates have been volatile, alleviating listed below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ enables for a progressive increase in its output towards the 5mn barrel per day production target when trade normalises. Versus this backdrop, the UAE will speed up the building of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in three months, driven mainly by improved domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and rate pressures from higher product and transportation costs are a common theme. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the remainder of the decade.