Global Investment Opportunities across the Middle East

Risks are slanted to the disadvantage. In case of an extended conflict, the current effect on the region will be compoundedthrough raised energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a stark pointer of the work ahead for the area: not just to weather shocks, however to reconstruct more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in infrastructure, and boost employment-creating sectors," said.

With peace and the ideal action, countries can build the institutions, capabilities and competitive sectors that produce chances for individuals." With this long-term vision in mind, the report takes a close look at the area's capacity for industrial policy government actions to increase tactical company activity as a motorist of economic growth 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 enterprises, but the results have actually been blended. The report highlights the crucial requirement for strong institutions and cautious targeting of policies. "As countries deal with the heavy toll of the present dispute, it is essential to also not forget the work needed for lasting peace and prosperity," said.

Evaluating GCC Market Potential in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared straight for the finance profession. The GCC economy deals with a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and financier belief to slowly normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a substantial action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, however the threat of a recession-inducing oil cost spike has actually declined. 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 forecasted 3.6% expansion before the war), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to avoid the interruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease projected previously. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage sustained in the last few months is significant. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed given that 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.

Foreign Capital Prospects within the GCC

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered comprehensive oil and gas production losses considering that 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, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in numerous decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. On the other hand, oil rates have been unstable, reducing listed 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 each day production target once trade normalises. Against this backdrop, the UAE will accelerate the building of a new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mainly by enhanced domestic need. However, they remain below long-run averages, with weak export orders and cost pressures from higher product and transport expenses are a common 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 gradual healing over the rest of the decade.