Essential Economic Expansion in 2026

Threats are slanted to the disadvantage. In case of an extended conflict, the current impacts on the region will be compoundedthrough raised energy and food prices, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a plain tip of the work ahead for the area: not only to weather shocks, but to rebuild more resilient economies with more powerful macroeconomic fundamentals, innovate and enhance governance, buy infrastructure, and increase employment-creating sectors," said.

With peace and the right action, nations can build the institutions, abilities and competitive sectors that develop chances for people." With this long-term vision in mind, the report takes a close look at the area's capacity for commercial policy government actions to increase strategic company activity as a chauffeur of financial growth and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been blended. The report highlights the important requirement for strong institutions and cautious targeting of policies. "As nations face the heavy toll of the present dispute, it is essential to likewise not forget the work needed for lasting peace and success," stated.

Securing Middle East Portfolios for 2026 Trends

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

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a considerable step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil rate spike has decreased. International 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 forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), greater 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 inability to prevent the interruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months back, with GDP forecast to contract by 2.4% compared to a 0.2% decrease predicted formerly. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage incurred in the last few months is considerable. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate since 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 struck late in the quarter.

Key Equity Market Insights for GCC Growth

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the dispute. Might 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 avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in numerous decades. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Meanwhile, oil costs have been unstable, relieving below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil costs 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 as soon as trade normalises. Against this background, the UAE will speed up the building of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven mostly by improved domestic demand. They stay below long-run averages, with weak export orders and cost pressures from higher material and transportation costs are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the remainder of the decade.