Advancing Industrial Growth via Strategic Diversification

Threats are slanted to the downside. In the occasion of a prolonged conflict, the existing impacts on the region will be compoundedthrough raised energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the region: not just to weather shocks, but to restore more resilient economies with more powerful macroeconomic fundamentals, innovate and improve governance, buy facilities, and enhance employment-creating sectors," said.

With peace and the right action, countries 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 capacity for industrial policy government actions to increase strategic company activity as a driver of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned enterprises, however the outcomes have been blended. The report highlights the crucial need for strong institutions and careful targeting of policies. "As nations deal with the heavy toll of today conflict, it is necessary to likewise not lose sight of the work needed for long-lasting peace and success," said.

GCC Equity Trading Trends in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the financing profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran agreement to end the war. We expect energy flows, tourism and investor belief to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States 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, but the danger of a recession-inducing oil rate spike has actually decreased. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 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 decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their failure to avoid the disruption to regional shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decrease forecasted formerly. We expect 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 economic damage sustained in the last couple of months is significant. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace because 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 interruption struck late in the quarter.

Essential Industrial Diversification for the Future

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses because the start of the conflict. Might data reveal local production almost cut in half 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 actually assisted prevent an even bigger 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 anticipate a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. Oil costs have actually been volatile, alleviating listed below $85 per barrel as the interim contract was announced.

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 a gradual boost in its output towards the 5mn barrel daily production target when trade normalises. Against this backdrop, the UAE will speed up the building and construction of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in 3 months, driven largely by improved domestic need. They stay below long-run averages, with weak export orders and price pressures from higher material and transport costs are a common style. Overall, we expect 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 decade.