Assessing GCC Market Potential in 2026

Risks are tilted to the drawback. In the event of an extended conflict, the present effect on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a stark tip of the work ahead for the region: not only to weather shocks, however to reconstruct more durable economies with more powerful macroeconomic principles, innovate and enhance governance, invest in facilities, and improve employment-creating sectors," said.

With peace and the ideal action, countries can construct the institutions, abilities and competitive sectors that develop opportunities for people." With this long-term vision in mind, the report takes a close appearance at the area's capacity for industrial policy federal government actions to increase tactical company activity as a driver of economic development and job development.

ANSR July GCC PRs 50DR+

Governments in the region have embraced commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, but the outcomes have been mixed. The report highlights the critical requirement for strong institutions and cautious targeting of policies. "As countries deal with the heavy toll of today conflict, it is necessary to also not forget the work needed for long-lasting peace and success," stated.

Future-Proofing GCC Investments against 2026 Trends

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the financing occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor belief to slowly normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a significant step 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 declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their inability to avoid the interruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage sustained in the last few months is substantial. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering 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 interruption struck late in the quarter.

Analyzing GCC Investment Potential in 2026

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the dispute. May data show regional production nearly halved 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 helped prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in a number of decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. On the other hand, oil rates have been unstable, reducing below $85 per barrel as the interim arrangement was revealed.

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

The May PMI studies reported output growth reaching its strongest level in three months, driven largely by improved domestic demand. Nevertheless, they stay below long-run averages, with weak export orders and cost pressures from higher product and transportation costs 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 progressive recovery over the remainder of the years.