Accelerating Industrial Growth via Strategic Diversification

Threats are slanted to the downside. In case of an extended dispute, the current effect on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The current crisis is a stark suggestion of the work ahead for the area: not only to weather shocks, however to reconstruct more durable economies with more powerful macroeconomic principles, innovate and enhance governance, buy facilities, and increase employment-creating sectors," stated.

With peace and the best action, countries can build the organizations, capabilities and competitive sectors that create opportunities for individuals." With this long-term vision in mind, the report takes a close appearance at the region's potential for commercial policy government actions to increase tactical service activity as a chauffeur of financial development and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have adopted commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the crucial requirement for strong organizations and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is necessary to likewise not lose sight of the work needed for long-lasting peace and prosperity," said.

The 2026 Business Landscape of Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly 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 circulations, tourist and investor sentiment to slowly normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim arrangement in between the US and Iran is a considerable action towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the threat of a recession-inducing oil cost spike has actually decreased. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability 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 earlier, with GDP projection to contract by 2.4% compared to a 0.2% decline projected previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted 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 significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate since 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 struck late in the quarter.

2026 GCC Economic Outlook

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses since the start of the dispute. Might information reveal regional production nearly cut in half 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast 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 severely depressed base. On the other hand, oil rates have been volatile, easing listed below $85 per barrel as the interim contract was revealed.

In the medium term, we expect oil rates to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables for a gradual increase in its output towards the 5mn barrel each day production target once trade normalises. Against this background, the UAE will speed up the building of a brand-new West-East pipeline that should double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in three months, driven mostly by enhanced domestic need. They stay below long-run averages, with weak export orders and price pressures from greater material and transport expenses 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 gradual healing over the rest of the years.