Key Economic Shifts for 2026

Threats are tilted to the downside. In case of a prolonged dispute, the current influence on the region will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark suggestion of the work ahead for the region: not only to weather shocks, but to restore more resilient economies with stronger macroeconomic basics, innovate and improve governance, purchase infrastructure, and increase employment-creating sectors," stated.

With peace and the right action, nations can build the institutions, abilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close appearance at the area's potential for industrial policy federal government actions to increase tactical organization activity as a motorist of financial development and job production.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the critical need for strong organizations and cautious targeting of policies. "As countries deal with the heavy toll of the present conflict, it is necessary to likewise not forget the work needed for lasting peace and success," stated.

Advancing Industrial Success via Strategic Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the finance profession. The GCC economy faces a marked contraction this year pending information of the US-Iran arrangement to end the war. We expect energy circulations, tourism and investor sentiment to slowly normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a significant action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, but the danger of a recession-inducing oil price spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to avoid the disruption to local shipping, war-driven infrastructure 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 formerly. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to expand this year.

The economic damage sustained in the last couple of months is considerable. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed given 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 interruption hit late in the quarter.

Navigating Capital Strategies in a Global Economy

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the conflict. May data reveal regional production nearly halved 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 bigger 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 decline in numerous years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. Meanwhile, oil costs have actually been unstable, reducing below $85 per barrel as the interim arrangement was revealed.

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

The May PMI surveys reported output growth reaching its greatest level in three months, driven mainly by enhanced domestic need. They stay below long-run averages, with weak export orders and rate pressures from higher 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% growth pre-war) and a progressive recovery over the remainder of the decade.