Future-Proofing Regional Portfolios for 2026 Trends

Risks are slanted to the downside. In case of an extended dispute, the current effect on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not just to weather shocks, but to rebuild more resilient economies with more powerful macroeconomic basics, innovate and improve governance, buy facilities, and improve employment-creating sectors," stated.

With peace and the ideal action, countries can build the institutions, abilities and competitive sectors that develop opportunities for individuals." With this long-term vision in mind, the report takes a close look at the region's potential for commercial policy government actions to increase strategic company activity as a chauffeur of economic growth and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have embraced industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, however the outcomes have actually been blended. The report highlights the crucial requirement for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of the present dispute, it is essential to likewise not forget the work required for long-lasting peace and success," said.

Evaluating Regional Investment Potential in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the financing occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourist and investor belief to gradually normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a significant step towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil price spike has actually decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected three months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to prevent the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The economic damage sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate considering 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 struck late in the quarter.

Top Foreign Investment Avenues in the GCC Market

Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered substantial oil and gas production losses considering that the start of the dispute. May data show regional 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 helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil prices have actually been volatile, easing below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil rates to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will speed up the building and construction of a 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 enhanced domestic demand. Nevertheless, they stay listed below long-run averages, with weak export orders and rate pressures from higher product and transportation expenses are a common style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the remainder of the years.