Accelerating Non-Oil Growth via Strategic Diversification

Risks are slanted to the drawback. In case of an extended dispute, the existing effect on the area will be compoundedthrough raised energy and food rates, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the region: not only to weather shocks, but to rebuild more resistant economies with stronger macroeconomic principles, innovate and enhance governance, invest in facilities, and improve employment-creating sectors," stated.

With peace and the ideal action, nations can construct the institutions, abilities and competitive sectors that develop opportunities for individuals." With this long-lasting vision in mind, the report takes a close take a look at the area's potential for commercial policy federal government actions to increase tactical business activity as a motorist of economic development and job production.

ANSR July GCC PRs 50DR+

Governments in the region have embraced commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the vital requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of today conflict, it is very important to likewise not forget the work needed for long-lasting peace and success," stated.

Assessing GCC Investment Resilience for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending information of the US-Iran contract to end the war. We expect energy circulations, tourism and financier sentiment to slowly normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

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

We anticipate a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), higher than the decline 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 disruption to regional shipping, war-driven facilities damage and tourist losses.

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

The financial damage sustained in the last few months is significant. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed 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.

Driving Industrial Success via Strategic Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have actually suffered substantial oil and gas production losses since the start of the conflict. Might data reveal regional production almost cut in half 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 contract by 14.5% this year, which will mark the steepest decline in numerous years. We then anticipate a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. On the other hand, oil prices have been volatile, easing below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel per day production target once trade normalises. Versus this background, the UAE will accelerate the construction of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its strongest level in 3 months, driven largely by improved domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and price pressures from higher material and transport costs are a typical theme. 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.