Evaluating Regional Investment Potential in 2026

Threats are tilted to the disadvantage. In the occasion of an extended conflict, the present effects on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain reminder of the work ahead for the area: not only to weather shocks, but to rebuild more durable economies with stronger macroeconomic fundamentals, innovate and enhance governance, purchase facilities, and enhance employment-creating sectors," stated.

With peace and the right action, countries can build the institutions, capabilities and competitive sectors that develop chances for people." With this long-term vision in mind, the report takes a close appearance at the area's potential for industrial policy federal government actions to increase strategic company activity as a chauffeur of financial development and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, however the results have been mixed. The report highlights the important need for strong institutions and cautious targeting of policies. "As countries face the heavy toll of today conflict, it is very important to likewise not forget the work needed for lasting peace and prosperity," stated.

Mastering Wealth Diversification for a 2026 Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourist and investor belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a significant step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely require time, but 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 projected three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater 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 inability to avoid the disruption to regional shipping, war-driven infrastructure 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 predicted previously. We expect Oman and Saudi Arabia to be the least negatively impacted 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 substantial. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate since 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 disturbance struck late in the quarter.

Why Industrial Diversification Will Transform GCC Markets

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered extensive oil and gas production losses given that the start of the conflict. Might data reveal regional production nearly cut in half 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 assisted avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. On the other hand, oil rates have actually been unstable, easing below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil rates to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a progressive boost in its output towards the 5mn barrel per day production target once trade normalises. Against this backdrop, the UAE will accelerate the construction of a 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 three months, driven mostly by improved domestic need. They stay below long-run averages, with weak export orders and price pressures from greater material and transportation costs are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the remainder of the years.