Key Foreign Capital Avenues for the GCC Market

Threats are slanted to the downside. In the occasion of a prolonged conflict, the current effect on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark reminder of the work ahead for the region: not only to weather shocks, but to reconstruct more resistant economies with stronger macroeconomic fundamentals, innovate and enhance governance, invest in facilities, and boost employment-creating sectors," said.

With peace and the best action, nations can develop the institutions, capabilities and competitive sectors that develop opportunities for people." With this long-lasting vision in mind, the report takes a close appearance at the area's potential for industrial policy federal government actions to increase strategic service activity as a motorist of financial growth and job production.

ANSR July GCC PRs 50DR+

Governments in the area have actually adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the crucial requirement for strong institutions and careful targeting of policies. "As countries face the heavy toll of today conflict, it is important to likewise not lose sight of the work required for lasting peace and success," stated.

Driving Non-Oil Growth via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared straight for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We expect energy flows, tourism and investor belief to gradually normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a significant step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil cost spike has actually declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth 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 inability to prevent the disruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 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 conflict, with both economies continuing to broaden this year.

The financial damage incurred in the last couple of months is considerable. Saudi GDP information for Q1 showed development 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.

Assessing Regional Market Potential in 2026

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered extensive oil and gas production losses given that the start of the dispute. May 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 assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Meanwhile, oil prices have actually been unstable, reducing listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil costs to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ permits for a progressive increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this background, the UAE will speed up the building and construction of a brand-new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven largely by enhanced domestic demand. However, they stay below long-run averages, with weak export orders and price pressures from higher product and transport costs are a typical theme. Overall, 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.