Analyzing Regional Market Resilience in 2026

Threats are tilted to the downside. In case of a prolonged dispute, the existing effect on the region will be compoundedthrough elevated energy and food rates, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the region: not only to weather shocks, but to rebuild more durable economies with more powerful macroeconomic basics, innovate and enhance governance, invest in facilities, and increase employment-creating sectors," stated.

With peace and the ideal action, nations can develop the organizations, abilities and competitive sectors that produce chances for people." With this long-lasting 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+

Federal governments in the region have embraced industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned business, however the outcomes have actually been blended. The report highlights the important need for strong institutions and careful targeting of policies. "As countries deal with the heavy toll of the present conflict, it is essential to likewise not lose sight of the work needed for long-lasting peace and prosperity," stated.

Top International Capital Avenues in the GCC Market

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the finance occupation. The GCC economy faces a significant contraction this year pending information of the US-Iran agreement to end the war. We expect energy circulations, tourism and investor belief to slowly normalise as war disruptions go away.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a considerable step towards reaching a full-blown offer. 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 actually declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), higher than the decrease 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 avoid the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, 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 negatively impacted by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred 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 given that 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 struck late in the quarter.

How Economic Diversification Will Transform Arabian Markets

Aside from Oman, all GCC producers along with Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the conflict. Might information show regional 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 actually helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. On the other hand, oil costs have actually been unpredictable, reducing below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ allows for a steady boost in its output towards the 5mn barrel each day production target when trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in three months, driven mainly by enhanced domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and price pressures from higher material and transportation expenses are a typical style. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the remainder of the decade.