The 2026 Investment Landscape of Arabia

Dangers are tilted to the drawback. In case of a prolonged conflict, the current impacts on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain tip of the work ahead for the region: not only to weather shocks, but to rebuild more durable economies with more powerful macroeconomic basics, innovate and improve governance, buy infrastructure, and improve employment-creating sectors," stated.

With peace and the right action, nations can develop the organizations, abilities and competitive sectors that produce chances for individuals." With this long-term vision in mind, the report takes a close take a look at the area's capacity for industrial policy government actions to increase strategic service activity as a driver of economic development and task production.

ANSR July GCC PRs 50DR+

Federal governments in the area have adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the outcomes have been mixed. The report highlights the crucial requirement for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of today dispute, it is necessary to likewise not lose sight of the work needed for lasting peace and prosperity," said.

Strategic Economic Shifts for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared straight for the finance occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourism and financier belief to slowly normalise as war disturbances subside.

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The interim arrangement between the US and Iran is a considerable step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil cost spike has actually decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, 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), greater 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 interruption to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decrease forecasted formerly. We anticipate Oman and Saudi Arabia to be the least negatively affected 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 substantial. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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.

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Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses considering that the start of the conflict. May data reveal local production nearly halved from pre-war levels, with the decrease 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 assisted avoid an even bigger plunge in output.

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Nonetheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of decades. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. Oil costs have actually been volatile, reducing listed below $85 per barrel as the interim arrangement was announced.

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

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mainly by improved domestic need. However, they stay below long-run averages, with weak export orders and rate pressures from greater product and transport costs are a typical style. Overall, 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.