Why Industrial Diversification Can Transform Arabian Markets

Dangers are tilted to the downside. In the event of a prolonged conflict, the present effects on the area will be compoundedthrough elevated energy and food rates, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the area: not only to weather shocks, but to reconstruct more durable economies with more powerful macroeconomic principles, innovate and enhance governance, buy infrastructure, and increase employment-creating sectors," said.

With peace and the best action, nations can build the institutions, capabilities and competitive sectors that create chances for individuals." With this long-term vision in mind, the report takes a close appearance at the region's potential for commercial policy government actions to increase strategic business activity as a chauffeur of financial growth and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have embraced commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the vital requirement for strong organizations and mindful targeting of policies. "As nations face the heavy toll of today dispute, it is essential to also not forget the work required for long-lasting peace and success," stated.

Top Foreign Capital Prospects for the GCC Market

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the finance profession. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy circulations, tourism and investor sentiment to gradually normalise as war disturbances decrease.

ANSR July GCC PRs 50DR+

The interim contract 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 require time, however the threat of a recession-inducing oil cost spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three 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), 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 failure 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 earlier, with GDP projection to contract by 2.4% compared to a 0.2% decline forecasted formerly. We expect Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage incurred in the last few months is significant. Saudi GDP data for Q1 revealed growth 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 disturbance hit late in the quarter.

GCC Stock Trading Patterns in 2026

Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered extensive oil and gas production losses given that the start of the dispute. Might data show local production nearly cut in half from pre-war levels, with the decrease 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 prevent an even larger plunge in output.

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We forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in numerous years. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Meanwhile, oil costs have actually been unstable, reducing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil prices to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel daily production target once trade normalises. Against this background, the UAE will accelerate the building of a brand-new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven mostly by enhanced domestic need. They stay listed below long-run averages, with weak export orders and rate pressures from higher material and transport expenses are a common theme. In general, we anticipate 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.