Strategic Economic Expansion in 2026

Dangers are tilted to the downside. In case of a prolonged conflict, the current impacts on the area will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the area: not just to weather shocks, but to restore more resistant economies with stronger macroeconomic fundamentals, innovate and enhance governance, invest in infrastructure, and enhance employment-creating sectors," said.

With peace and the ideal action, nations can build the organizations, abilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close look at the area's capacity for industrial policy federal government actions to increase tactical company activity as a driver of financial development and task production.

ANSR July GCC PRs 50DR+

Governments in the region have embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the results have actually been blended. The report highlights the crucial requirement for strong organizations and cautious targeting of policies. "As nations face the heavy toll of the present conflict, it is important to also not lose sight of the work required for lasting peace and success," said.

GCC Stock Market Trends for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area 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 anticipate energy flows, tourism and financier sentiment to gradually normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a considerable step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil rate spike has actually decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected three months earlier, 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 hit, owing to their failure to prevent the disruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decline predicted previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage incurred in the last few 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 rate 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.

Analyzing Regional Investment Resilience for 2026

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the conflict. Might information reveal local production nearly halved 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 assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

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

In the medium term, we expect oil prices to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a gradual boost in its output towards the 5mn barrel each day production target once trade normalises. Against this backdrop, the UAE will speed up the construction of a new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven mainly by improved domestic need. They stay below long-run averages, with weak export orders and price pressures from higher product and transport costs 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 remainder of the decade.