Top Foreign Investment Prospects for the GCC Market

Risks are slanted to the drawback. In case of a prolonged conflict, the current effects on the area will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark tip of the work ahead for the area: not only to weather shocks, but to restore more resilient economies with more powerful macroeconomic principles, innovate and enhance governance, buy infrastructure, and improve employment-creating sectors," stated.

With peace and the best action, countries can construct the organizations, abilities and competitive sectors that develop opportunities for people." With this long-lasting vision in mind, the report takes a close look at the region's capacity for industrial policy federal government actions to increase strategic service activity as a chauffeur of economic growth and job creation.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, but the results have been blended. The report highlights the crucial need for strong organizations and mindful targeting of policies. "As nations face the heavy toll of today conflict, it is necessary to likewise not lose sight of the work needed for lasting peace and success," stated.

Future Business Landscape in Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the finance occupation. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We expect energy flows, tourism and financier sentiment to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a significant step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil rate spike has actually decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 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), higher than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to avoid the disruption to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease 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 expand this year.

The economic damage sustained in the last couple of months is considerable. Saudi GDP data 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 interruption hit late in the quarter.

2026 Business Climate in the GCC

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered comprehensive 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, including by Saudi Arabia through the East-West Pipeline and the UAE through the Habshan-Fujairah pipeline, have actually helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. Meanwhile, oil rates have actually been unstable, alleviating below $85 per barrel as the interim arrangement 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+ enables a gradual boost in its output towards the 5mn barrel per day production target once trade normalises. Versus this backdrop, the UAE will accelerate 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 three months, driven mainly by improved domestic need. They stay below long-run averages, with weak export orders and cost pressures from higher product and transportation expenses are a typical 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 recovery over the rest of the years.