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Risks are slanted to the disadvantage. In the occasion of an extended conflict, the current impacts on the area will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the region: not only to weather shocks, however to restore more durable economies with more powerful macroeconomic principles, innovate and enhance governance, purchase facilities, and increase employment-creating sectors," stated.

With peace and the best action, nations can develop the institutions, capabilities and competitive sectors that develop chances for people." With this long-lasting vision in mind, the report takes a close take a look at the area's capacity for commercial policy federal government actions to increase strategic organization activity as a motorist of economic development and task creation.

ANSR July GCC PRs 50DR+

Governments in the region have adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the outcomes have been blended. The report highlights the important need for strong organizations and cautious targeting of policies. "As nations deal with the heavy toll of the present dispute, it is essential to also not lose sight of the work needed for lasting peace and success," said.

2026 Investment Landscape in Arabia

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

ANSR July GCC PRs 50DR+

The interim arrangement in between the US 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 price spike has decreased. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We forecast 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 stand apart as the hardest struck, owing to their inability to prevent the interruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to contract by 2.4% compared to a 0.2% decrease forecasted previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted 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 substantial. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace since 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 disruption hit late in the quarter.

Why Industrial Diversification Can Transform Arabian Markets

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered extensive oil and gas production losses given that the start of the conflict. Might data show regional production almost cut in half from pre-war levels, with the decrease 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 actually assisted avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Meanwhile, oil rates have actually been unpredictable, relieving listed 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 baseline, as the UAE's departure from OPEC+ permits for a progressive increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this backdrop, the UAE will speed up the building and construction of a new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in 3 months, driven mostly by improved domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and cost pressures from greater product and transport costs are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive healing over the rest of the years.