Essential Industrial Expansion for the Future

Risks are slanted to the downside. In case of an extended dispute, the current effect on the region will be compoundedthrough elevated energy and food prices, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a stark tip of the work ahead for the area: not only to weather shocks, however to restore more durable economies with more powerful macroeconomic principles, innovate and improve governance, invest in infrastructure, and improve employment-creating sectors," stated.

With peace and the right action, countries can build the institutions, capabilities and competitive sectors that create chances for individuals." With this long-term vision in mind, the report takes a close look at the region's potential for commercial policy federal government actions to increase strategic business activity as a chauffeur of financial development and task production.

ANSR July GCC PRs 50DR+

Governments in the area have actually adopted commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, however the results have actually been blended. The report highlights the important need for strong organizations and careful targeting of policies. "As countries deal with the heavy toll of today dispute, it is necessary to also not forget the work needed for lasting peace and success," stated.

Accelerating Economic Success via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the finance profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran arrangement to end the war. We expect energy flows, tourism and investor belief 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 step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, but the threat of a recession-inducing oil rate spike has declined. International 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 projected 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to prevent the interruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decline predicted previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to expand this year.

The economic damage incurred in the last couple of months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate 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 disruption struck late in the quarter.

Mastering Investment Diversification for a Global Economy

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the conflict. Might information show regional production almost cut in half from pre-war levels, with the decline 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 actually 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 numerous decades. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Meanwhile, oil prices have been volatile, easing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil costs to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a progressive increase in its output towards the 5mn barrel per day production target once trade normalises. Against this background, the UAE will accelerate the building and construction of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in 3 months, driven largely by improved domestic need. Nevertheless, they stay below long-run averages, with weak export orders and cost pressures from greater material and transport costs are a common theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the rest of the decade.