Essential Equity Capital Insights for GCC Growth

Threats are tilted to the downside. In the occasion of an extended conflict, the existing influence on the region will be compoundedthrough raised energy and food rates, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not only to weather shocks, but to reconstruct more durable economies with more powerful macroeconomic fundamentals, innovate and enhance governance, buy infrastructure, and enhance employment-creating sectors," stated.

With peace and the ideal action, countries can build 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 region's capacity for industrial policy government actions to increase strategic company activity as a motorist of financial development and job development.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the important need for strong institutions and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is necessary to likewise not lose sight of the work required for long-lasting peace and prosperity," stated.

Why Industrial Shifts Will Shape GCC Markets

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 faces a significant contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy circulations, tourism and financier belief to slowly normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a significant action towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil rate spike has decreased. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, 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), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to avoid the disruption to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease forecasted previously. We expect Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The economic damage sustained in the last few months is considerable. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed because the Covid pandemic. On a seasonally adjusted 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.

International Investment Prospects across the Middle East

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered comprehensive oil and gas production losses since the start of the dispute. Might data show regional production nearly halved 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 bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to contract 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 mostly by normalisation from a badly depressed base. Oil prices have been unpredictable, reducing below $85 per barrel as the interim arrangement was announced.

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

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven mostly by improved domestic need. However, they remain listed below long-run averages, with weak export orders and cost pressures from higher product and transport costs are a typical theme. In general, we expect 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 decade.