Key Stock Market Strategies for Regional Growth

Risks are tilted to the downside. In case of an extended dispute, the current impacts on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark tip of the work ahead for the area: not only to weather shocks, however to reconstruct more durable economies with stronger macroeconomic fundamentals, innovate and improve governance, purchase facilities, and enhance employment-creating sectors," said.

With peace and the right action, countries can develop the organizations, capabilities and competitive sectors that create opportunities for people." 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 tactical service activity as a chauffeur of economic development and task production.

ANSR July GCC PRs 50DR+

Governments in the area have adopted commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the outcomes have been mixed. The report highlights the important requirement for strong organizations and careful targeting of policies. "As countries deal with the heavy toll of the present dispute, it is very important to also not lose sight of the work needed for lasting peace and success," stated.

Why Economic Shifts Will Transform GCC Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly for the finance occupation. The GCC economy deals with a significant contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy flows, tourism and investor belief to slowly normalise as war interruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a considerable action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil rate spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth 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 hit, owing to their inability to prevent the disruption to local shipping, war-driven infrastructure damage and tourist 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% decline projected previously. We anticipate 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 significant. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed because the Covid pandemic. On a seasonally adjusted 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.

2026 Investment Landscape in Arabia

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered substantial oil and gas production losses because the start of the dispute. Might data reveal local production almost cut in half 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 assisted avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Oil costs have been volatile, alleviating below $85 per barrel as the interim contract 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 gradual boost in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this background, the UAE will speed up the construction of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in 3 months, driven mostly by enhanced domestic demand. They stay below long-run averages, with weak export orders and price pressures from greater material and transportation costs are a typical theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the rest of the years.