Key International Capital Prospects in the GCC Market

Dangers are slanted to the disadvantage. In case of an extended dispute, the present effects on the area will be compoundedthrough elevated energy and food prices, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a stark tip of the work ahead for the area: not just to weather shocks, however to restore more resistant economies with more powerful macroeconomic principles, innovate and enhance governance, purchase infrastructure, and improve employment-creating sectors," said.

With peace and the ideal action, nations can build the institutions, capabilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close appearance at the region's capacity for commercial policy federal government actions to increase strategic company activity as a driver of economic development and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region 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 mixed. The report highlights the critical requirement for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of the present conflict, it is essential to also not forget the work needed for lasting peace and prosperity," stated.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared directly for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy circulations, tourist and investor belief to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract between the US and Iran is a significant step 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 rate spike has declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted three months ago, 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), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to prevent the interruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decrease predicted previously. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage sustained in the last couple of months is considerable. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed 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 disruption struck late in the quarter.

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Aside from Oman, all GCC producers as well as Iran and Iraq have suffered comprehensive oil and gas production losses given that the start of the conflict. May data show regional production almost halved from pre-war levels, with the decline 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

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

In the medium term, we expect oil costs to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel daily production target when trade normalises. Versus this background, the UAE will speed up the building and construction of a brand-new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven largely by improved domestic demand. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from higher material and transportation expenses are a common style. 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 healing over the remainder of the decade.