Positioning GCC Portfolios for 2026 Shifts

Risks are slanted to the downside. In the event of an extended conflict, the existing impacts on the area will be compoundedthrough raised energy and food rates, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the area: not only to weather shocks, however to reconstruct more resistant economies with more powerful macroeconomic fundamentals, innovate and enhance governance, purchase facilities, and increase employment-creating sectors," said.

With peace and the right action, countries can construct the organizations, abilities and competitive sectors that produce chances for people." With this long-lasting vision in mind, the report takes a close appearance at the region's capacity for industrial policy federal government actions to increase strategic organization activity as a chauffeur of economic growth and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have embraced industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned business, but the results have actually been blended. The report highlights the important requirement for strong organizations and mindful targeting of policies. "As countries face the heavy toll of today conflict, it is necessary to likewise not forget the work needed for long-lasting peace and success," stated.

Middle East Equity Trading Trends in 2026

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

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a significant step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, but the threat of a recession-inducing oil rate spike has actually declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to prevent the interruption to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP forecast to contract by 2.4% compared to a 0.2% decline forecasted formerly. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to broaden this year.

The financial damage sustained in the last few months is significant. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering 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.

Future Investment Landscape of Arabia

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

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Oil costs have actually been unstable, easing listed below $85 per barrel as the interim agreement was announced.

In the medium term, we expect oil costs to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables for a gradual increase in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a brand-new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven largely by improved domestic demand. They stay listed below long-run averages, with weak export orders and rate pressures from higher product and transportation costs are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive healing over the remainder of the decade.