Positioning Middle East Investments for 2026 Trends

Risks are slanted to the downside. In the occasion of an extended conflict, the existing influence on the region will be compoundedthrough elevated energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain tip of the work ahead for the region: not only to weather shocks, however to rebuild more resistant economies with stronger macroeconomic fundamentals, innovate and enhance governance, buy facilities, and improve employment-creating sectors," said.

With peace and the best action, nations can develop the organizations, abilities and competitive sectors that create chances for individuals." With this long-term vision in mind, the report takes a close appearance at the region's potential for commercial policy government actions to increase tactical company activity as a chauffeur of financial development and task production.

ANSR July GCC PRs 50DR+

Federal 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, but the outcomes have actually been blended. The report highlights the important need for strong organizations and cautious targeting of policies. "As countries deal with the heavy toll of the present dispute, it is very important to likewise not forget the work required for long-lasting peace and success," stated.

Emerging Stock Trading Trends in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared straight for the finance profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourism and investor belief to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim agreement 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 take time, but the threat of a recession-inducing oil price spike has decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months back, and 3.1% in 2027.

We forecast 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 inability to avoid the disruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP forecast to contract by 2.4% compared to a 0.2% decline predicted previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to broaden 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 broadening by 2.9%, the weakest speed since 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 struck late in the quarter.

Key Foreign Capital Prospects in the GCC Region

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered substantial oil and gas production losses since the start of the dispute. May information reveal regional production almost 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 assisted prevent an even bigger 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 decline in numerous years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. On the other hand, oil rates have been volatile, reducing listed below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil rates to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ permits for a gradual increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Against this background, the UAE will accelerate the building and 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 3 months, driven mostly by enhanced domestic demand. Nevertheless, they remain listed below long-run averages, with weak export orders and rate pressures from higher product 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 gradual recovery over the rest of the decade.