Global Investment Prospects within the GCC

Risks are slanted to the downside. In the event of an extended conflict, the current influence on the area will be compoundedthrough elevated energy and food rates, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the area: not just to weather shocks, but to rebuild more resilient economies with stronger macroeconomic basics, innovate and improve governance, purchase infrastructure, and increase employment-creating sectors," stated.

With peace and the best action, nations can build the institutions, abilities and competitive sectors that develop chances for people." With this long-term vision in mind, the report takes a close take a look at the region's capacity for industrial policy government actions to increase tactical business activity as a driver of economic development and job development.

ANSR July GCC PRs 50DR+

Governments in the area have embraced industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, but the results have been blended. The report highlights the vital need for strong organizations and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is very important to also not forget the work needed for lasting peace and prosperity," stated.

2026 Middle Eastern Financial Projections

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 marked contraction this year pending details of the US-Iran arrangement to end the war. We expect energy circulations, tourist and financier sentiment to gradually normalise as war disturbances decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a substantial step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely require time, but the risk of a recession-inducing oil price spike has actually declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their failure to prevent the interruption to local shipping, war-driven infrastructure 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 predicted previously. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage sustained in the last couple of months is considerable. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace considering 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 hit late in the quarter.

Positioning Regional Investments against 2026 Trends

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered comprehensive oil and gas production losses because the start of the conflict. Might data show regional production almost halved 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 a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Oil costs have been unstable, relieving below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil costs to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ allows for a progressive boost in its output towards the 5mn barrel daily production target once trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in 3 months, driven largely by improved domestic need. Nevertheless, they remain below long-run averages, with weak export orders and cost pressures from greater material and transportation expenses are a typical style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady healing over the rest of the years.