Navigating Wealth Strategies for a Global Economy

Risks are tilted to the downside. In the occasion of an extended conflict, the existing effect on the region will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark suggestion of the work ahead for the area: not only to weather shocks, but to restore more resistant economies with more powerful macroeconomic fundamentals, innovate and enhance governance, invest in facilities, and increase employment-creating sectors," stated.

With peace and the ideal action, countries can develop the organizations, capabilities 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 area's capacity for commercial policy government actions to increase strategic business activity as a driver of economic development and task production.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the outcomes have been mixed. The report highlights the important need for strong institutions and cautious targeting of policies. "As nations face the heavy toll of today conflict, it is necessary to also not forget the work needed for long-lasting peace and prosperity," said.

Driving Non-Oil Growth via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast 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 agreement to end the war. We anticipate energy flows, tourism and investor belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a significant step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take time, however the threat of a recession-inducing oil rate spike has actually declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months back, 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), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to prevent the interruption to local shipping, war-driven infrastructure damage and tourism losses.

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

The economic damage sustained in the last couple of months is significant. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace since 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.

Why Industrial Diversification Will Shape Arabian Markets

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered extensive oil and gas production losses since the start of the dispute. May data reveal local 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 prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in a number of years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil costs have been volatile, reducing below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil rates to be a little 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 as soon as trade normalises. Versus 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 development reaching its greatest level in three months, driven largely by enhanced domestic need. However, they stay below long-run averages, with weak export orders and rate pressures from greater product and transportation expenses are a common theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive healing over the remainder of the decade.