Top Foreign Capital Prospects for the GCC Region

Threats are slanted to the disadvantage. In the event of a prolonged conflict, the current influence on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the region: not just to weather shocks, however to rebuild more resistant economies with stronger macroeconomic basics, innovate and improve governance, purchase facilities, and improve employment-creating sectors," stated.

With peace and the ideal action, countries can build the organizations, abilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close look at the region's capacity for industrial policy government actions to increase strategic company activity as a motorist of economic development and task development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the results have actually been blended. The report highlights the vital need for strong institutions and cautious targeting of policies. "As countries deal with the heavy toll of today dispute, it is crucial to likewise not forget the work required for lasting peace and prosperity," said.

Upcoming Regional Financial Projections

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the finance occupation. The GCC economy faces a marked contraction this year pending details of the US-Iran contract to end the war. We expect energy circulations, tourism and investor belief to gradually normalise as war disturbances decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a significant step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil price spike has declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we predicted 3 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), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their failure to avoid the interruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decrease predicted formerly. We expect 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 incurred in the last couple of months is considerable. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate considering that 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 interruption hit late in the quarter.

How Economic Shifts Will Shape Arabian Markets

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered comprehensive oil and gas production losses given that the start of the conflict. Might information reveal local 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 assisted avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several decades. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Oil prices have actually been unstable, easing below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a progressive increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this backdrop, 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 studies reported output development reaching its greatest level in three months, driven largely by enhanced domestic need. However, they stay below long-run averages, with weak export orders and price pressures from greater material and transport costs are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the rest of the years.