The Future Investment Landscape of Arabia

Dangers are tilted to the disadvantage. In case of a prolonged dispute, the current effect on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark tip of the work ahead for the area: not only to weather shocks, however to rebuild more resistant economies with more powerful macroeconomic fundamentals, innovate and improve governance, buy facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can construct the organizations, abilities 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 potential for commercial policy federal government actions to increase strategic business activity as a driver of financial development and task development.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced commercial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, but the results have actually been mixed. The report highlights the vital requirement for strong organizations and careful targeting of policies. "As nations deal with the heavy toll of the present dispute, it is necessary to also not lose sight of the work required for long-lasting peace and success," stated.

Upcoming GCC Market Projections

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 details of the US-Iran contract to end the war. We anticipate energy circulations, tourist and investor belief to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a substantial 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 rate spike has declined. International GDP is anticipated 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 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 out as the hardest struck, owing to their failure to prevent the interruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP forecast to agreement by 2.4% compared to a 0.2% decrease forecasted previously. We anticipate 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 financial damage sustained in the last couple of months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed 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.

How Economic Shifts Will Shape Arabian Markets

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses considering that the start of the conflict. Might data reveal regional production nearly 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 avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several years. We then expect a 23.5% rebound next year, driven largely by normalisation from a seriously depressed base. Meanwhile, oil costs have been unstable, alleviating below $85 per barrel as the interim agreement was announced.

In the medium term, we expect oil costs to be slightly lower than our pre-war baseline, 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. Against this backdrop, the UAE will speed up the building of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in 3 months, driven largely by improved domestic demand. However, they stay below long-run averages, with weak export orders and cost pressures from higher material and transport expenses are a common theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady healing over the rest of the decade.