Emerging Equity Market Patterns for 2026

Threats are slanted to the downside. In the event of an extended dispute, the current influence on the area will be compoundedthrough elevated energy and food costs, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the region: not only to weather shocks, however to reconstruct more durable economies with more powerful macroeconomic principles, innovate and improve governance, purchase facilities, and increase employment-creating sectors," stated.

With peace and the right action, countries can construct the institutions, abilities and competitive sectors that produce chances for people." With this long-lasting vision in mind, the report takes a close look at the region's potential for industrial policy government actions to increase strategic company activity as a chauffeur of economic growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, however the results have been blended. The report highlights the crucial requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of today conflict, it is necessary to also not forget the work required for lasting peace and prosperity," said.

Middle East Equity Market Trends for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared directly for the finance profession. The GCC economy faces a marked contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy flows, tourist and investor sentiment to slowly normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a considerable step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take time, but the threat of a recession-inducing oil cost spike has actually decreased. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% expansion before the war), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to prevent the interruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to contract by 2.4% compared to a 0.2% decrease projected previously. We expect Oman and Saudi Arabia to be the least adversely affected by the fallout from the dispute, with both economies continuing to expand this year.

The economic damage sustained in the last few months is substantial. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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 interruption struck late in the quarter.

Essential Economic Expansion for the Future

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses given that the start of the conflict. May data show regional production nearly 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 assisted 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 mainly by normalisation from a badly depressed base. Meanwhile, oil rates have been unstable, alleviating listed below $85 per barrel as the interim contract was announced.

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

The May PMI studies reported output development reaching its strongest level in 3 months, driven mainly by enhanced domestic demand. They stay below long-run averages, with weak export orders and rate pressures from higher material and transportation expenses are a typical style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the rest of the decade.