Key Foreign Capital Avenues in the GCC Market

Dangers are tilted to the disadvantage. In the occasion of an extended conflict, the existing effect on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain tip of the work ahead for the area: not just to weather shocks, but to reconstruct more resilient economies with more powerful macroeconomic basics, innovate and enhance governance, purchase facilities, and boost employment-creating sectors," said.

With peace and the right action, nations can build the institutions, capabilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close take a look at the area's capacity for industrial policy federal government actions to increase strategic business activity as a chauffeur of financial growth and task production.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually embraced industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the results have actually been blended. The report highlights the important requirement for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of today conflict, it is necessary to likewise not lose sight of the work needed for lasting peace and prosperity," said.

Future Business Climate of the GCC

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 deals with a marked contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourism and financier sentiment to gradually normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a substantial action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, but the danger of a recession-inducing oil rate spike has actually decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out 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 ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease forecasted previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage sustained in the last couple of months is significant. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace given that 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 disruption struck late in the quarter.

Analyzing Regional Market Resilience for 2026

Aside from Oman, all GCC manufacturers along with Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the conflict. May data reveal regional production almost halved from pre-war levels, with the decline 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 actually 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 decline in a number of decades. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. On the other hand, oil prices have been volatile, alleviating below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil rates to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this background, the UAE will accelerate the construction of a brand-new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven mostly by enhanced domestic demand. Nevertheless, they remain listed below long-run averages, with weak export orders and cost pressures from greater product and transportation expenses are a common theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the rest of the years.