Driving Economic Success through Strategic Diversification

Threats are tilted to the downside. In case of an extended conflict, the current effect on the region will be compoundedthrough raised energy and food rates, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark tip of the work ahead for the area: not just to weather shocks, however to reconstruct more durable economies with stronger macroeconomic principles, innovate and enhance governance, invest in facilities, and enhance employment-creating sectors," stated.

With peace and the best action, nations can develop the institutions, abilities and competitive sectors that develop opportunities for individuals." With this long-term vision in mind, the report takes a close look at the area's potential for industrial policy government actions to increase tactical organization activity as a driver of economic development and job production.

ANSR July GCC PRs 50DR+

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

The Future Business Climate of Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the financing 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, tourist and financier sentiment to gradually normalise as war disruptions go away.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a significant step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil rate spike has declined. International GDP is anticipated 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% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their failure to avoid the disturbance to regional shipping, war-driven facilities damage and tourism 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 projected previously. 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 economic damage sustained in the last few months is substantial. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed given 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 interruption struck late in the quarter.

2026 Middle Eastern Financial Forecasts

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

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in a number of decades. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil rates have been unstable, easing listed below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel per day production target once trade normalises. Against this backdrop, the UAE will speed up the building and construction of a brand-new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in 3 months, driven mostly by enhanced domestic need. However, they remain listed below long-run averages, with weak export orders and cost pressures from greater product and transportation expenses are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive healing over the remainder of the years.