Upcoming Regional Economic Outlook

Risks are slanted to the downside. In the occasion of a prolonged conflict, the present effect on the region will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the region: not only to weather shocks, however to restore more durable economies with stronger macroeconomic fundamentals, innovate and improve governance, buy infrastructure, and improve employment-creating sectors," said.

With peace and the best action, nations can build the organizations, abilities and competitive sectors that develop opportunities for people." With this long-term vision in mind, the report takes a close take a look at the region's potential for commercial policy government actions to increase tactical service activity as a chauffeur of financial growth and job creation.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, but the outcomes have actually been mixed. The report highlights the important requirement for strong organizations and cautious targeting of policies. "As countries deal with the heavy toll of today dispute, it is necessary to also not forget the work required for lasting peace and prosperity," stated.

Navigating Wealth Strategies for a Global Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the financing occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor sentiment to slowly normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a considerable action towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take time, but the threat of a recession-inducing oil rate spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months back, 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), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, 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 ago, with GDP projection to contract by 2.4% compared to a 0.2% decline predicted previously. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last couple of months is substantial. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering that the Covid pandemic. On a seasonally changed basis, GDP contracted 1.2% q/q, driven by a 6.8% fall in oil activities as the Strait of Hormuz interruption hit late in the quarter.

Middle East Stock Market Trends for 2026

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses since the start of the conflict. Might information show local 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+

Nonetheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Oil rates have been unpredictable, relieving listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil prices to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ enables a steady boost in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will accelerate the building of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in three months, driven mainly by improved domestic demand. However, they remain listed below long-run averages, with weak export orders and price pressures from greater product and transport costs are a typical theme. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the remainder of the years.