Assessing Regional Market Resilience for 2026

Risks are tilted to the drawback. In the event of an extended conflict, the current effect on the area will be compoundedthrough raised energy and food prices, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the area: not only to weather shocks, however to rebuild more resistant economies with more powerful macroeconomic principles, innovate and enhance governance, invest in infrastructure, and boost employment-creating sectors," said.

With peace and the right action, nations can construct the institutions, abilities and competitive sectors that develop opportunities for people." With this long-lasting vision in mind, the report takes a close take a look at the area's capacity for industrial policy federal government actions to increase strategic organization activity as a chauffeur of economic development and task development.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the vital need for strong institutions and mindful targeting of policies. "As nations deal with the heavy toll of the present conflict, it is essential to also not forget the work required for lasting peace and prosperity," stated.

Strategic Capital Expansion for the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared straight for the financing occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We expect energy flows, tourist and financier sentiment to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a significant step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil rate spike has actually declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months back, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), greater than the decrease in the very 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 facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP projection to agreement 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 financial damage sustained in the last few months is significant. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace because 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 disruption struck late in the quarter.

Middle East Stock Market Patterns for 2026

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered substantial oil and gas production losses since the start of the dispute. Might data reveal regional production almost cut in half 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 assisted prevent an even larger 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 decrease in several years. We then expect a 23.5% rebound next year, driven largely by normalisation from a severely depressed base. Meanwhile, oil rates have been unpredictable, relieving listed below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil rates to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ enables a gradual increase in its output towards the 5mn barrel each day production target once trade normalises. Versus this backdrop, the UAE will speed up the building and construction of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output development reaching its greatest level in three months, driven mainly by enhanced domestic need. However, they remain listed below long-run averages, with weak export orders and rate pressures from greater product and transportation expenses are a common theme. 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 decade.