Positioning Regional Portfolios against 2026 Trends

Threats are tilted to the drawback. In case of an extended conflict, the present impacts on the area will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark reminder of the work ahead for the area: not just to weather shocks, but to restore more resistant economies with stronger macroeconomic fundamentals, innovate and improve governance, buy facilities, and improve employment-creating sectors," stated.

With peace and the best action, nations can build the institutions, capabilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close take a look at the area's capacity for commercial policy government actions to increase strategic service activity as a driver of financial growth and job development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, but the results have actually been blended. The report highlights the important need for strong institutions and mindful targeting of policies. "As countries face the heavy toll of today dispute, it is essential to likewise not forget the work required for long-lasting peace and success," stated.

Why Economic Diversification Will Transform GCC Markets

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region prepared straight for the financing occupation. The GCC economy deals with a significant contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourist and financier belief to slowly normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a substantial action towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely require time, however the danger of a recession-inducing oil cost spike has decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months back, 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), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their inability to avoid the disturbance to local shipping, war-driven facilities damage and tourist 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% decline predicted formerly. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to expand 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 disruption hit late in the quarter.

International Capital Opportunities within the Middle East

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses since the start of the conflict. Might data show local production nearly 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we forecast 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 mostly by normalisation from a significantly depressed base. On the other hand, oil costs have been volatile, easing below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil prices to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a gradual increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this backdrop, the UAE will speed up the building and construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in three months, driven mostly by enhanced domestic demand. They stay below long-run averages, with weak export orders and rate pressures from greater product and transport costs are a common style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady healing over the remainder of the decade.