Assessing Regional Market Resilience in 2026

Risks are slanted to the disadvantage. In the event of a prolonged conflict, the existing effect on the area will be compoundedthrough raised energy and food prices, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark tip of the work ahead for the region: not only to weather shocks, however to rebuild more resistant economies with more powerful macroeconomic fundamentals, innovate and improve governance, purchase facilities, and improve employment-creating sectors," stated.

With peace and the right action, nations can construct the organizations, abilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for commercial policy government actions to increase strategic organization activity as a chauffeur of financial growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, but the results have actually been blended. The report highlights the vital requirement for strong organizations and cautious targeting of policies. "As countries face the heavy toll of today dispute, it is necessary to also not lose sight of the work required for long-lasting peace and success," said.

Global Investment Prospects within the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the financing occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran arrangement to end the war. We anticipate energy circulations, tourist and investor belief to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a considerable 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 price spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months earlier, 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 out as the hardest struck, owing to their failure to avoid the disturbance to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to broaden this year.

The economic damage incurred in the last couple of months is substantial. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed given that 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 disturbance struck late in the quarter.

Analyzing Regional Market Potential in 2026

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses because the start of the dispute. May data reveal regional production nearly cut in half 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 assisted 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 a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Oil prices have actually been unpredictable, easing below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil costs to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ allows for a progressive increase in its output towards the 5mn barrel daily production target once trade normalises. Against this background, the UAE will speed up the construction of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven largely by enhanced domestic demand. They remain listed below long-run averages, with weak export orders and cost pressures from greater material and transportation costs are a typical 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 progressive recovery over the remainder of the years.