The 2026 Business Landscape in Arabia

Dangers are tilted to the downside. In the event of a prolonged conflict, the existing influence on the region will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark suggestion of the work ahead for the area: not only to weather shocks, but to rebuild more resistant economies with more powerful macroeconomic fundamentals, innovate and improve governance, purchase infrastructure, and increase employment-creating sectors," stated.

With peace and the right action, countries can develop the institutions, capabilities and competitive sectors that develop chances for individuals." With this long-lasting vision in mind, the report takes a close appearance at the region's potential for commercial policy federal government actions to increase tactical service activity as a driver of economic development and task production.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually embraced commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the critical need for strong institutions and careful targeting of policies. "As countries face the heavy toll of the present conflict, it is very important to likewise not forget the work required for long-lasting peace and success," said.

Driving Economic Growth through Global Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the finance profession. The GCC economy deals with a marked contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourist and investor belief to gradually normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a considerable action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely require time, however the threat of a recession-inducing oil rate spike has decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to prevent the disturbance to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to agreement by 2.4% compared to a 0.2% decline projected formerly. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage incurred in the last few months is substantial. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding 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 hit late in the quarter.

GCC Equity Market Trends in 2026

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. May data show regional production almost 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 bigger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. On the other hand, oil rates have been volatile, alleviating below $85 per barrel as the interim contract was revealed.

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

The May PMI studies reported output growth reaching its strongest level in 3 months, driven largely by enhanced domestic need. Nevertheless, they stay below long-run averages, with weak export orders and price pressures from higher material and transport costs 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 gradual healing over the rest of the years.