Strategic Economic Expansion for 2026

Risks are tilted to the downside. In case of an extended conflict, the present effect on the area will be compoundedthrough elevated energy and food prices, declining trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark tip of the work ahead for the area: not only to weather shocks, but to restore more resistant economies with stronger macroeconomic basics, innovate and improve governance, purchase facilities, and improve employment-creating sectors," stated.

With peace and the ideal action, nations can develop the institutions, capabilities 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 industrial policy government actions to increase tactical business activity as a chauffeur of economic development and task development.

ANSR July GCC PRs 50DR+

Governments in the region have actually adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the important requirement for strong institutions and mindful targeting of policies. "As countries deal with the heavy toll of today dispute, it is essential to also not forget the work required for lasting peace and success," said.

Key Foreign Capital Prospects for the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region 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 financier belief to slowly normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a significant step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil price spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months earlier, 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), higher 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 failure to avoid the disturbance to regional shipping, war-driven infrastructure damage and tourism 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% decline forecasted previously. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to expand this year.

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

Future Middle Eastern Financial Outlook

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered comprehensive oil and gas production losses because the start of the conflict. Might data reveal local production almost halved 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 helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in a number of decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Oil rates have been volatile, reducing listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ allows for a steady boost in its output towards the 5mn barrel each day production target once trade normalises. Versus this backdrop, the UAE will speed up the building of a new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in three months, driven largely by enhanced domestic demand. They stay listed below long-run averages, with weak export orders and cost pressures from higher material and transportation costs are a common style. 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 rest of the decade.