Evaluating Regional Market Resilience for 2026

Dangers are slanted to the disadvantage. In the event of an extended conflict, the existing effects on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark reminder of the work ahead for the region: not only to weather shocks, but to reconstruct more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can develop the institutions, abilities and competitive sectors that develop chances for individuals." With this long-term vision in mind, the report takes a close look at the region's potential for industrial policy government actions to increase strategic company activity as a chauffeur of financial development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually adopted commercial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the outcomes have been mixed. The report highlights the critical need for strong organizations and careful targeting of policies. "As nations face the heavy toll of today conflict, it is necessary to likewise not forget the work needed for long-lasting peace and prosperity," stated.

Strategic Economic Shifts for 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the finance occupation. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We anticipate energy circulations, tourism and investor belief to slowly normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract between the United States and Iran is a significant step towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely take time, however the danger of a recession-inducing oil cost spike has declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months back, and 3.1% in 2027.

We anticipate 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 apart as the hardest hit, owing to their failure to avoid the disturbance to regional shipping, war-driven infrastructure damage and tourist losses.

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

The financial damage incurred in the last couple of months is considerable. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering that 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 disturbance hit late in the quarter.

Why Industrial Shifts Can Transform Arabian Markets

Aside from Oman, all GCC producers in addition to Iran and Iraq have suffered substantial oil and gas production losses since the start of the dispute. Might data reveal local 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 actually assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in numerous years. We then expect a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. On the other hand, oil rates have been volatile, relieving listed below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil prices to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a progressive increase in its output towards the 5mn barrel each day production target when trade normalises. Versus this background, the UAE will speed up the building and construction of a new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven mainly by enhanced domestic need. However, they stay below long-run averages, with weak export orders and rate pressures from greater material and transportation expenses are a common style. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady healing over the remainder of the years.