Analyzing GCC Market Potential for 2026

Threats are slanted to the drawback. In case of a prolonged dispute, the present effects on the area will be compoundedthrough elevated energy and food prices, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the area: not just to weather shocks, however to restore more resilient economies with more powerful macroeconomic principles, innovate and enhance governance, purchase facilities, and improve employment-creating sectors," said.

With peace and the right action, nations can develop the institutions, abilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close appearance at the region's potential for commercial policy federal government actions to increase tactical business activity as a motorist of financial growth and job 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 business, however the outcomes have been mixed. The report highlights the critical requirement for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of today dispute, it is very important to likewise not lose sight of the work required for long-lasting peace and prosperity," said.

Assessing Regional Market Resilience in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared directly for the finance profession. The GCC economy faces a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy flows, tourism and investor belief to slowly normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a significant step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil rate spike has decreased. Worldwide 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 forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, 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 three months earlier, with GDP forecast to contract by 2.4% compared to a 0.2% decline projected 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 financial damage incurred in the last few months is considerable. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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 struck late in the quarter.

Securing Regional Portfolios against 2026 Trends

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses considering that the start of the conflict. May information reveal local production nearly halved 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 assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a significantly depressed base. Meanwhile, oil prices have actually been volatile, reducing listed below $85 per barrel as the interim arrangement was announced.

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 a steady increase in its output towards the 5mn barrel daily production target once trade normalises. Versus this background, the UAE will speed up the building of a new West-East pipeline that need to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven largely by improved domestic demand. They remain listed below long-run averages, with weak export orders and price pressures from greater material and transportation expenses are a common theme. In general, 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 rest of the decade.