Accelerating Industrial Growth through Global Diversification

Threats are slanted to the downside. In the event of an extended conflict, the current impacts on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain pointer of the work ahead for the area: not only to weather shocks, but to rebuild more durable economies with stronger macroeconomic principles, innovate and enhance governance, buy infrastructure, and increase employment-creating sectors," stated.

With peace and the ideal action, countries can construct the organizations, capabilities and competitive sectors that create opportunities for individuals." With this long-lasting vision in mind, the report takes a close look at the area's capacity for commercial policy government actions to increase strategic service activity as a driver of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, but the results have actually been blended. The report highlights the vital requirement for strong institutions and careful targeting of policies. "As countries deal with the heavy toll of today dispute, it is essential to also not forget the work needed for lasting peace and success," said.

Why Economic Shifts Can Transform GCC Markets

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

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a substantial step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil cost spike has actually declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted three months back, 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), greater 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 prevent the disturbance to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to agreement by 2.4% compared to a 0.2% decline projected formerly. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last few months is significant. Saudi GDP data for Q1 showed development 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 interruption hit late in the quarter.

Future Middle Eastern Economic Projections

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. May information reveal local production almost 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 assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several decades. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. On the other hand, oil costs have actually been unstable, relieving listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil prices to be a little lower than our pre-war baseline, 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 background, the UAE will accelerate the building of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven largely by improved domestic demand. They stay below long-run averages, with weak export orders and price pressures from higher material and transportation costs are a common style. 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 recovery over the remainder of the decade.