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Dangers are tilted to the disadvantage. In case of an extended conflict, the current influence on the area will be compoundedthrough elevated energy and food costs, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain suggestion of the work ahead for the area: not only to weather shocks, but to rebuild more durable economies with stronger macroeconomic basics, innovate and improve governance, invest in infrastructure, and improve employment-creating sectors," said.

With peace and the right action, countries can develop the organizations, capabilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the region's capacity for industrial policy federal government actions to increase strategic service activity as a motorist of financial development and task creation.

ANSR July GCC PRs 50DR+

Governments in the region have adopted industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the results have actually been blended. The report highlights the critical need for strong institutions and mindful targeting of policies. "As nations face the heavy toll of the present dispute, it is essential to likewise not forget the work needed for long-lasting peace and success," said.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared directly for the financing profession. The GCC economy faces a marked contraction this year pending information of the US-Iran contract to end the war. We anticipate energy flows, tourist and financier sentiment to slowly normalise as war disturbances decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a significant action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, however the threat of a recession-inducing oil cost spike has decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months ago, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth 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 struck, owing to their inability to prevent the disturbance to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease projected previously. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to broaden this year.

The economic damage incurred in the last couple of months is considerable. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate 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.

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Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have suffered substantial oil and gas production losses given that the start of the dispute. May data show local production nearly halved from pre-war levels, with the decrease 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 larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. Oil rates have been unstable, alleviating listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ allows for a progressive boost in its output towards the 5mn barrel each day production target when trade normalises. Against this backdrop, the UAE will accelerate the construction of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in three months, driven largely by enhanced domestic demand. They stay below long-run averages, with weak export orders and rate pressures from higher material and transportation expenses 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 progressive healing over the rest of the decade.