Future-Proofing Regional Investments for 2026 Trends

Threats are tilted to the downside. In case of a prolonged conflict, the current effect on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a plain suggestion of the work ahead for the area: not only to weather shocks, however to rebuild more resistant economies with more powerful macroeconomic principles, innovate and improve governance, purchase infrastructure, and boost employment-creating sectors," stated.

With peace and the best action, nations can construct the institutions, capabilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the region's potential for industrial policy government actions to increase tactical company activity as a chauffeur of economic growth and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the critical requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of today conflict, it is very important to also not forget the work needed for lasting peace and prosperity," said.

Future-Proofing GCC Portfolios for 2026 Shifts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared directly for the financing occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy circulations, tourist and financier belief to gradually normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a substantial action towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely require time, but the threat of a recession-inducing oil price spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), greater 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 interruption to local shipping, war-driven infrastructure 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 predicted formerly. We expect Oman and Saudi Arabia to be the least adversely affected by the fallout from the dispute, with both economies continuing to broaden this year.

The financial 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 broadening by 2.9%, the weakest pace given 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 struck late in the quarter.

Navigating Investment Strategies for a Global Economy

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses because the start of the dispute. Might data show regional production nearly cut in half from pre-war levels, with the decrease 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 assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a significantly depressed base. On the other hand, oil rates have been unpredictable, reducing below $85 per barrel as the interim arrangement was announced.

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

The May PMI studies reported output growth reaching its greatest level in 3 months, driven mostly by improved domestic need. They stay below long-run averages, with weak export orders and cost pressures from higher product and transport costs are a common 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 steady recovery over the remainder of the decade.