Key Equity Capital Insights for GCC Growth

Threats are slanted to the disadvantage. In the event of an extended dispute, the current effect on the region will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the area: not just to weather shocks, but to reconstruct more resilient economies with more powerful macroeconomic principles, innovate and improve governance, buy infrastructure, and improve employment-creating sectors," said.

With peace and the best action, countries can construct the institutions, 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 area's potential for industrial policy government actions to increase tactical organization activity as a chauffeur of economic growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have actually adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the vital requirement for strong organizations and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is essential to also not forget the work needed for long-lasting peace and success," stated.

Strategic Economic Expansion for the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly for the financing occupation. The GCC economy deals with a significant contraction this year pending details of the US-Iran arrangement to end the war. We expect energy circulations, tourist and investor belief to slowly normalise as war disturbances decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a considerable action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take time, however the threat of a recession-inducing oil cost spike has decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, 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), 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 failure to prevent the disruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to agreement 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 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace 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.

Accelerating Economic Growth via Strategic Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses since the start of the dispute. May data show regional production nearly cut in half from pre-war levels, with the decline 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, 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 rates have been volatile, relieving listed below $85 per barrel as the interim agreement was announced.

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 gradual boost in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this backdrop, the UAE will speed up the building 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 greatest level in 3 months, driven largely by improved domestic demand. However, they remain below long-run averages, with weak export orders and rate pressures from greater product and transportation expenses are a common theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady recovery over the remainder of the decade.