The Future Business Landscape in Arabia

Threats are tilted to the disadvantage. In case of an extended conflict, 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 existing crisis is a stark reminder of the work ahead for the area: not just to weather shocks, but to reconstruct more resilient economies with stronger macroeconomic basics, innovate and improve governance, invest in facilities, and boost employment-creating sectors," stated.

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

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, but the outcomes have been blended. The report highlights the crucial requirement for strong institutions and careful targeting of policies. "As nations deal with the heavy toll of today conflict, it is crucial to likewise not lose sight of the work needed for lasting peace and prosperity," said.

Analyzing Regional Investment Potential in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared straight for the financing profession. The GCC economy deals with a marked contraction this year pending information of the US-Iran arrangement to end the war. We expect energy circulations, tourist and financier belief to slowly normalise as war interruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a substantial action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take time, however the threat 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 anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to prevent the disturbance to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decline predicted 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 financial damage sustained in the last few months is considerable. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace given that 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 disturbance hit late in the quarter.

Top International Capital Avenues in the GCC Market

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered comprehensive oil and gas production losses since the start of the dispute. Might data show local production nearly halved 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 assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease 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 costs have actually been unpredictable, alleviating below $85 per barrel as the interim contract 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 steady increase in its output towards the 5mn barrel daily production target when trade normalises. Versus this backdrop, the UAE will speed up the construction of a new West-East pipeline that need to double the capability of export through Fujairah.

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