Advancing Economic Success via Global Diversification

Risks are slanted to the drawback. In the event of a prolonged dispute, the existing effects on the region will be compoundedthrough elevated 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 just to weather shocks, but to restore more resilient economies with stronger macroeconomic fundamentals, innovate and improve governance, invest in facilities, and increase employment-creating sectors," stated.

With peace and the ideal action, nations can build the institutions, capabilities and competitive sectors that develop chances for people." With this long-lasting vision in mind, the report takes a close look at the area's capacity for industrial policy government actions to increase tactical service activity as a driver of financial growth and job development.

ANSR July GCC PRs 50DR+

Governments in the region have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the critical requirement for strong institutions and mindful targeting of policies. "As nations face the heavy toll of today conflict, it is crucial to also not forget the work required for long-lasting peace and prosperity," said.

The 2026 Investment Landscape in Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the finance occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy flows, tourist and investor belief to slowly normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States 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, however the risk of a recession-inducing oil cost spike has actually decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, 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 first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to avoid 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 forecast to agreement by 2.4% compared to a 0.2% decrease predicted previously. We expect Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred in the last couple of months is significant. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate 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 struck late in the quarter.

Optimizing Investment Strategies in a Global Economy

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered comprehensive oil and gas production losses since the start of the conflict. 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 actually assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Oil rates have been volatile, reducing listed below $85 per barrel as the interim contract was revealed.

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

The May PMI surveys reported output growth reaching its greatest level in three months, driven mostly by improved domestic demand. They stay below long-run averages, with weak export orders and price pressures from higher material and transportation costs are a common theme. In general, 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 remainder of the years.