2026 GCC Market Projections

Risks are slanted to the drawback. In case of an extended conflict, the existing effect on the region will be compoundedthrough raised energy and food costs, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a stark tip of the work ahead for the region: not just to weather shocks, but to reconstruct more durable economies with more powerful macroeconomic principles, innovate and improve governance, purchase facilities, and boost employment-creating sectors," stated.

With peace and the ideal action, countries can construct the organizations, abilities and competitive sectors that create opportunities for people." With this long-lasting vision in mind, the report takes a close take a look at the area's capacity for commercial policy federal government actions to increase strategic service activity as a chauffeur of economic growth and task production.

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 outcomes have been mixed. The report highlights the crucial need for strong organizations and cautious targeting of policies. "As nations face the heavy toll of today conflict, it is very important to also not forget the work required for lasting peace and prosperity," said.

Key International Investment Prospects in the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the region 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 flows, tourist and investor belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a significant 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 rate spike has actually declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected 3 months back, 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 first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their inability to prevent the disturbance to local shipping, war-driven facilities damage and tourism 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% decrease predicted formerly. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last few months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed since 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 disruption hit late in the quarter.

Why Industrial Shifts Will Shape Arabian Markets

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered substantial oil and gas production losses since the start of the conflict. Might data show 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 bigger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in several decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Oil costs have actually been unstable, alleviating listed below $85 per barrel as the interim arrangement was revealed.

In the medium term, we anticipate oil rates to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel daily production target once trade normalises. Versus this backdrop, the UAE will accelerate the building of a brand-new West-East pipeline that need to double the capability 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 listed below long-run averages, with weak export orders and rate pressures from higher product and transportation costs are a typical style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive healing over the remainder of the decade.