Evaluating Regional Investment Resilience in 2026

Threats are tilted to the drawback. In the occasion of a prolonged dispute, the current influence on the area will be compoundedthrough elevated energy and food costs, declining trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a plain tip of the work ahead for the region: not only to weather shocks, however to reconstruct more resilient economies with stronger macroeconomic basics, innovate and enhance governance, buy facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can build the institutions, capabilities and competitive sectors that create chances for individuals." With this long-lasting vision in mind, the report takes a close take a look at the region's potential for industrial policy government actions to increase strategic business activity as a driver of economic development and task production.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, but the results have been blended. The report highlights the crucial requirement for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of today dispute, it is very important to likewise not lose sight of the work needed for long-lasting peace and success," said.

Upcoming Regional Financial Outlook

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the financing occupation. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We expect energy circulations, tourism and investor belief to gradually normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim contract between the US and Iran is a considerable step towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take some time, but the danger of a recession-inducing oil rate spike has actually declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth 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 avoid the disturbance to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease predicted previously. We expect 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 incurred in the last couple of months is significant. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate considering 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 hit late in the quarter.

Essential Stock Market Insights for GCC Investors

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses because the start of the conflict. Might information show 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 larger plunge in output.

ANSR July GCC PRs 50DR+

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

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

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven largely by enhanced domestic demand. Nevertheless, they stay listed below long-run averages, with weak export orders and price pressures from greater material and transport costs are a typical style. 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 recovery over the rest of the years.