Strategic Capital Expansion in 2026

Risks are tilted to the disadvantage. In the event of an extended conflict, the current effects on the region will be compoundedthrough raised energy and food prices, declining trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a stark reminder of the work ahead for the area: not just to weather shocks, however to rebuild more resilient economies with stronger macroeconomic principles, innovate and enhance governance, invest in facilities, and boost employment-creating sectors," said.

With peace and the best action, countries can develop the organizations, capabilities and competitive sectors that create opportunities for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for commercial policy federal government actions to increase tactical service activity as a chauffeur of economic development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the area have adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned enterprises, but the outcomes have been blended. The report highlights the crucial need for strong institutions and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is essential to also not forget the work required for lasting peace and success," said.

Advancing Economic Success through Global Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy circulations, tourism and financier sentiment to gradually normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement between the US and Iran is a substantial 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 danger of a recession-inducing oil cost spike has decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to avoid the interruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decrease forecasted formerly. We expect 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 few months is significant. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed given 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 hit late in the quarter.

2026 Investment Landscape in Arabia

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered extensive oil and gas production losses because the start of the conflict. Might information reveal regional 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 prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

However, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in a number of decades. We then expect a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Meanwhile, oil costs have actually been volatile, relieving listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil rates to be a little 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 daily production target once trade normalises. Versus this background, the UAE will speed up the construction of a brand-new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in three months, driven mainly by enhanced domestic demand. They stay below long-run averages, with weak export orders and rate pressures from higher material and transportation expenses are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady recovery over the remainder of the years.