Analyzing Regional Market Potential in 2026

Threats are tilted to the downside. In case of an extended conflict, the existing effects on the region will be compoundedthrough raised energy and food costs, declining trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a plain reminder of the work ahead for the area: not only to weather shocks, however to rebuild more resilient economies with more powerful macroeconomic principles, innovate and improve governance, invest in facilities, and increase employment-creating sectors," said.

With peace and the right action, nations can develop the organizations, abilities and competitive sectors that create chances for individuals." With this long-lasting vision in mind, the report takes a close appearance at the area's potential for industrial policy government actions to increase strategic service activity as a chauffeur of financial growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced commercial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, however the results have been blended. The report highlights the vital requirement for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of the present conflict, it is necessary to likewise not forget the work required for lasting peace and success," stated.

Future-Proofing GCC Portfolios against 2026 Shifts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the financing occupation. 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 financier sentiment to gradually normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a significant action towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely require time, but the threat of a recession-inducing oil rate spike has declined. International 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 anticipate 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 3 months back, with GDP projection to agreement by 2.4% compared to a 0.2% decrease forecasted formerly. We anticipate Oman and Saudi Arabia to be the least negatively impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The economic damage incurred in the last couple of months is significant. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace 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 disturbance struck late in the quarter.

Critical Stock Capital Strategies for GCC Growth

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the conflict. Might data reveal local production nearly 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 helped 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 decline in several years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Meanwhile, oil costs have been volatile, easing listed below $85 per barrel as the interim contract was revealed.

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+ permits a progressive increase in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this background, the UAE will accelerate the construction of a new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven mostly by improved domestic need. Nevertheless, they remain listed below long-run averages, with weak export orders and price pressures from greater material and transportation costs 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 progressive healing over the rest of the years.