Key International Capital Prospects for the GCC Region

Dangers are tilted to the drawback. In case of a prolonged dispute, the present effect on the area will be compoundedthrough elevated energy and food prices, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the area: not just to weather shocks, but to rebuild more resilient economies with stronger macroeconomic fundamentals, innovate and enhance governance, invest in facilities, and enhance employment-creating sectors," said.

With peace and the right action, nations can construct the institutions, capabilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close take a look at the area's potential for industrial policy government actions to increase strategic company activity as a chauffeur of financial growth and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the outcomes have actually been mixed. The report highlights the important need for strong institutions and mindful targeting of policies. "As countries face the heavy toll of the present conflict, it is very important to also not lose sight of the work needed for lasting peace and prosperity," stated.

Why Economic Shifts Can Transform GCC Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the finance profession. The GCC economy faces a marked contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy circulations, 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 substantial step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, however the threat of a recession-inducing oil cost spike has actually decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to avoid the interruption to local shipping, war-driven facilities damage and tourism losses.

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

The financial damage incurred in the last couple of months is considerable. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace because 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 hit late in the quarter.

Future Business Landscape in Arabia

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered comprehensive oil and gas production losses given that the start of the conflict. May data reveal local production nearly cut in half 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 actually helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Oil rates have actually been unpredictable, reducing listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits for a gradual increase in its output towards the 5mn barrel per day production target when trade normalises. Against this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in three months, driven mainly by enhanced domestic demand. They remain listed below long-run averages, with weak export orders and price pressures from greater product and transportation expenses are a common theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the rest of the decade.