Evaluating Regional Investment Resilience in 2026

Threats are tilted to the drawback. In case of an extended conflict, the existing effect on the area will be compoundedthrough raised energy and food costs, decreasing trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain tip of the work ahead for the region: not just to weather shocks, but to rebuild more resilient economies with stronger macroeconomic basics, innovate and improve governance, purchase infrastructure, and improve employment-creating sectors," said.

With peace and the right action, nations can develop the organizations, abilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close appearance at the area's capacity for industrial policy federal government actions to increase strategic business activity as a driver of financial growth and job production.

ANSR July GCC PRs 50DR+

Governments in the area have adopted industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been mixed. The report highlights the crucial need for strong organizations and careful targeting of policies. "As nations face the heavy toll of the present conflict, it is important to likewise not forget the work required for long-lasting peace and success," said.

Key Foreign Investment Prospects for the GCC Region

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the finance occupation. The GCC economy deals with a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy flows, tourism and financier sentiment to gradually normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim contract between the US and Iran is a considerable step towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take some time, but the danger of a recession-inducing oil price spike has actually declined. Worldwide 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 first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to prevent the disturbance to local shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection 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 broaden this year.

The economic damage incurred 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 because 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.

2026 Middle Eastern Economic Forecasts

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered extensive oil and gas production losses since the start of the conflict. May data reveal local production almost halved from pre-war levels, with the decrease 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 prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we anticipate 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. Oil rates have actually been unpredictable, easing below $85 per barrel as the interim arrangement was revealed.

In the medium term, we expect oil prices to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ permits a progressive increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Against this backdrop, the UAE will speed up the building and 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 three months, driven mostly by enhanced domestic demand. They stay below long-run averages, with weak export orders and price pressures from greater material and transportation expenses 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 steady healing over the remainder of the decade.