Essential Capital Shifts in 2026

Threats are slanted to the downside. In case of a prolonged conflict, the current impacts on the region will be compoundedthrough raised energy and food rates, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the area: not only to weather shocks, however to reconstruct more resilient economies with stronger macroeconomic principles, innovate and improve governance, invest in facilities, and improve employment-creating sectors," stated.

With peace and the right action, countries can develop the organizations, abilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close take a look at the region's capacity for industrial policy federal government actions to increase tactical company activity as a motorist of economic growth and job production.

ANSR July GCC PRs 50DR+

Governments in the region have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, but the results have actually been mixed. The report highlights the important need for strong organizations and careful targeting of policies. "As countries face the heavy toll of today conflict, it is essential to likewise not forget the work needed for lasting peace and success," stated.

Strategic Economic Diversification in the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared directly for the financing occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourism and financier sentiment to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a significant action towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil cost spike has decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

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

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decline projected 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 financial damage sustained in the last few months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed 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 interruption struck late in the quarter.

Emerging Equity Trading Patterns in 2026

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered comprehensive oil and gas production losses since the start of the dispute. Might data show regional production almost cut in half 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 anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. Oil prices have been unpredictable, relieving below $85 per barrel as the interim contract was revealed.

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

The May PMI studies reported output development reaching its strongest level in three months, driven largely by enhanced domestic need. They stay listed below long-run averages, with weak export orders and cost pressures from higher material and transport expenses are a common style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady recovery over the rest of the years.