Positioning Regional Investments for 2026 Shifts

Threats are tilted to the downside. In the event of a prolonged conflict, the existing influence on the area will be compoundedthrough elevated energy and food rates, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain reminder of the work ahead for the area: not only to weather shocks, however to restore more resistant economies with stronger macroeconomic fundamentals, innovate and enhance governance, invest in infrastructure, and boost employment-creating sectors," stated.

With peace and the best action, countries can construct the institutions, abilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for industrial policy government actions to increase tactical business activity as a driver of financial development and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, however the results have actually been mixed. The report highlights the important requirement for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of today dispute, it is important to likewise not lose sight of the work required for long-lasting peace and prosperity," stated.

Securing Middle East Investments for 2026 Shifts

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 marked contraction this year pending information of the US-Iran agreement to end the war. We expect energy flows, tourist and investor sentiment to slowly normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim agreement between the United States and Iran is a significant step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely require time, but the danger of a recession-inducing oil cost spike has actually declined. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decrease 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 avoid the disruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decrease forecasted previously. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage sustained in the last few months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed 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 struck late in the quarter.

Future 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 given that the start of the dispute. May data show regional production almost 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 bigger plunge in output.

ANSR July GCC PRs 50DR+

However, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Meanwhile, oil prices have been unpredictable, alleviating below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil costs to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ permits for a progressive increase in its output towards the 5mn barrel each day production target once trade normalises. Versus this background, the UAE will accelerate the construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven largely by improved domestic demand. Nevertheless, they remain below long-run averages, with weak export orders and price pressures from higher product and transport expenses are a typical style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the rest of the years.