Strategic Capital Expansion in 2026

Dangers are tilted to the downside. In the occasion of a prolonged conflict, the current influence on the region will be compoundedthrough elevated energy and food prices, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark reminder of the work ahead for the area: not just to weather shocks, but to restore more resilient economies with more powerful macroeconomic fundamentals, innovate and improve governance, purchase facilities, and increase employment-creating sectors," stated.

With peace and the best action, nations can construct the institutions, abilities and competitive sectors that create opportunities for people." With this long-lasting vision in mind, the report takes a close appearance at the area's capacity for commercial policy federal government actions to increase tactical company activity as a motorist of economic growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have adopted commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the outcomes have been mixed. The report highlights the important requirement for strong institutions and mindful targeting of policies. "As countries deal with the heavy toll of today dispute, it is crucial to also not forget the work needed for lasting peace and prosperity," said.

Key Capital Diversification in the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor belief to slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim contract between the US and Iran is a substantial step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil cost spike has actually decreased. Global GDP is expected 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 projected 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 hit, owing to their inability to prevent the disruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decline forecasted previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The financial damage sustained in the last few months is significant. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace given that 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.

Optimizing Investment Diversification for a 2026 Economy

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the dispute. May information show local production almost halved from pre-war levels, with the decrease 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 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 a number of decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a significantly depressed base. Meanwhile, oil prices have actually been unpredictable, easing listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive boost in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this background, the UAE will speed up the construction of a brand-new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in 3 months, driven mainly by improved domestic demand. They remain below long-run averages, with weak export orders and price pressures from greater material and transportation expenses are a typical style. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a progressive recovery over the rest of the years.