Global Investment Opportunities across the Middle East

Threats are slanted to the drawback. In case of a prolonged conflict, the present effects on the region will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark suggestion of the work ahead for the region: not just to weather shocks, however to reconstruct more resilient economies with more powerful macroeconomic basics, innovate and improve governance, invest in infrastructure, and improve employment-creating sectors," said.

With peace and the ideal action, countries can build the institutions, 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 area's potential for industrial policy government actions to increase tactical company activity as a motorist of economic development and task development.

ANSR July GCC PRs 50DR+

Governments in the area have embraced industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned enterprises, but the results have been mixed. The report highlights the crucial requirement for strong institutions and mindful targeting of policies. "As countries deal with the heavy toll of today dispute, it is necessary to also not forget the work required for long-lasting peace and success," said.

Why Industrial Diversification Will Shape Arabian Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the finance profession. The GCC economy faces a significant contraction this year pending information of the US-Iran agreement to end the war. We expect energy flows, tourism and financier sentiment to slowly normalise as war disruptions go away.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a significant action towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take time, but the danger of a recession-inducing oil rate spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to prevent the disturbance to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP forecast to agreement by 2.4% compared to a 0.2% decline projected previously. We expect 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 sustained in the last few months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate because 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.

How Economic Shifts Will Transform Arabian Markets

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses considering that the start of the dispute. May data reveal 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of decades. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a significantly depressed base. On the other hand, oil costs have been unpredictable, easing below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil prices to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a gradual boost in its output towards the 5mn barrel each day production target once trade normalises. Against this backdrop, the UAE will speed up the building of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven largely by enhanced domestic need. They stay listed below long-run averages, with weak export orders and cost pressures from greater product and transport costs are a common theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive recovery over the rest of the years.