Global Capital Prospects within the Middle East

Risks are tilted to the disadvantage. In case of a prolonged dispute, the current effect on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark suggestion of the work ahead for the area: not just to weather shocks, however to restore more durable economies with stronger macroeconomic fundamentals, innovate and improve governance, buy infrastructure, and increase employment-creating sectors," stated.

With peace and the right action, countries can construct the organizations, capabilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for commercial policy federal government actions to increase strategic company activity as a driver of economic development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually embraced industrial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, but the results have been blended. The report highlights the important requirement for strong organizations and careful targeting of policies. "As nations deal with the heavy toll of today conflict, it is very important to likewise not lose sight of the work required for lasting peace and success," stated.

Analyzing Regional Market Resilience in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran agreement to end the war. We expect energy circulations, tourism and financier belief to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract between the US and Iran is a considerable step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil price spike has actually declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth before the war), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their inability to prevent the disturbance to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decline forecasted 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 sustained in the last couple of months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace since 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 disturbance hit late in the quarter.

The Future Business Landscape of the GCC

Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered comprehensive oil and gas production losses given that the start of the dispute. Might information show regional production nearly halved 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Oil rates have actually been unstable, reducing listed below $85 per barrel as the interim agreement was announced.

In the medium term, we anticipate oil costs to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a gradual increase in its output towards the 5mn barrel each day production target when trade normalises. Against this backdrop, the UAE will accelerate the construction of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in three months, driven mostly by enhanced domestic need. However, they stay below long-run averages, with weak export orders and price pressures from higher material and transport expenses are a typical style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the rest of the decade.