Securing Middle East Investments against 2026 Shifts

Risks are tilted to the disadvantage. In the occasion of a prolonged dispute, the present influence on the area will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the area: not just to weather shocks, however to rebuild more durable economies with stronger macroeconomic principles, innovate and enhance governance, invest in facilities, and improve employment-creating sectors," stated.

With peace and the best action, countries can build the organizations, abilities and competitive sectors that produce chances for individuals." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for industrial policy federal government actions to increase strategic organization activity as a driver of financial growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the outcomes have been mixed. The report highlights the critical need for strong institutions and mindful targeting of policies. "As countries face the heavy toll of the present conflict, it is essential to likewise not lose sight of the work needed for long-lasting peace and success," said.

Key Foreign Investment Prospects for the GCC Market

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and financier belief to gradually normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a considerable action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, however the danger of a recession-inducing oil price spike has decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months earlier, 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 decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart 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 projection to agreement by 2.4% compared to a 0.2% decline predicted previously. 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 incurred in the last couple of months is substantial. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace since 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 struck late in the quarter.

How Industrial Diversification Will Shape Arabian Markets

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the dispute. Might 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 assisted 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 decrease in numerous decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Oil prices have actually been unpredictable, easing below $85 per barrel as the interim agreement was revealed.

In the medium term, we expect oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a gradual increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this backdrop, the UAE will speed up the building and construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven mainly by improved domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and rate pressures from greater product and transportation expenses are a typical style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the rest of the years.