Advancing Industrial Success through Strategic Diversification

Threats are slanted to the drawback. In case of an extended dispute, the existing influence on the area will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark tip of the work ahead for the region: not just to weather shocks, however to restore more resistant economies with more powerful macroeconomic principles, innovate and enhance governance, buy infrastructure, and improve employment-creating sectors," said.

With peace and the ideal action, nations can develop the institutions, abilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close take a look at the region's potential for commercial policy federal government actions to increase strategic organization activity as a motorist of financial development and task creation.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the outcomes have been blended. The report highlights the critical requirement for strong organizations and cautious targeting of policies. "As countries deal with the heavy toll of the present conflict, it is very important to likewise not forget the work needed for lasting peace and success," said.

Essential Equity Capital Strategies for Regional Investors

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the finance profession. 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, tourist and financier sentiment to slowly normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a substantial step towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil rate spike has actually decreased. International GDP is anticipated 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% expansion before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to avoid the disturbance to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP projection to agreement 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 dispute, with both economies continuing to expand this year.

The financial damage sustained in the last few months is significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate since 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 hit late in the quarter.

Middle East Equity Market Trends for 2026

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered extensive oil and gas production losses because the start of the conflict. May data show regional production almost cut in half 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in numerous years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Oil prices have been unpredictable, easing below $85 per barrel as the interim agreement was announced.

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

The May PMI studies reported output development reaching its strongest level in three months, driven largely by enhanced domestic need. However, they remain below long-run averages, with weak export orders and price pressures from higher product and transport costs are a common 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 steady recovery over the rest of the years.