Future Middle Eastern Market Outlook

Dangers are tilted to the disadvantage. In the occasion of a prolonged dispute, the current effect on the region will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a stark reminder of the work ahead for the region: not only to weather shocks, however to reconstruct more resilient economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can construct the organizations, abilities and competitive sectors that develop 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 tactical service activity as a driver of financial growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have adopted industrial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the important requirement for strong organizations and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is very important to also not forget the work needed for long-lasting peace and prosperity," stated.

Key International Investment Prospects for the GCC Market

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly for the finance profession. The GCC economy faces a marked contraction this year pending details of the US-Iran agreement to end the war. We expect energy circulations, tourism and investor belief to gradually normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a substantial step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely require time, however the risk of a recession-inducing oil cost spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months ago, 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), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest hit, owing to their failure to avoid the disturbance to local shipping, war-driven facilities damage and tourism losses.

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

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

Essential Equity Capital Strategies for GCC Investors

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the conflict. Might 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 actually helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several years. We then expect a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. Oil costs have actually been unstable, reducing below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil rates to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel daily production target once trade normalises. Against this backdrop, the UAE will speed up the construction of a brand-new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in 3 months, driven mainly by improved domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and rate pressures from greater material 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 progressive healing over the rest of the years.