Optimizing Capital Diversification in a 2026 Economy

Dangers are slanted to the disadvantage. In case of a prolonged conflict, the current impacts on the area will be compoundedthrough raised energy and food rates, declining trade, tourist and remittances, increased financial pressures, and displacement. "The existing crisis is a stark pointer of the work ahead for the region: not only to weather shocks, however to restore more resilient economies with more powerful macroeconomic basics, innovate and improve governance, buy facilities, and improve employment-creating sectors," stated.

With peace and the best action, countries can build the organizations, capabilities and competitive sectors that develop opportunities for individuals." With this long-lasting vision in mind, the report takes a close appearance at the region's capacity for industrial policy federal government actions to increase strategic organization activity as a motorist of economic growth and task creation.

ANSR July GCC PRs 50DR+

Governments in the area have actually adopted industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the outcomes have actually been mixed. The report highlights the important need for strong institutions and cautious targeting of policies. "As countries deal with the heavy toll of today dispute, it is very important to likewise not lose sight of the work required for long-lasting peace and prosperity," said.

Advancing Economic Success via Global Diversification

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared straight for the finance occupation. The GCC economy faces a marked contraction this year pending information of the US-Iran agreement to end the war. We expect energy flows, tourism and investor belief to gradually normalise as war interruptions subside.

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 complete return to normality in the Strait of Hormuz will likely require time, however the threat of a recession-inducing oil cost spike has declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, 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), greater than the decline in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest struck, owing to their inability to avoid the interruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decline forecasted formerly. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage incurred in the last few months is substantial. Saudi GDP information for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace since 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.

Positioning GCC Investments for 2026 Shifts

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered extensive oil and gas production losses given that the start of the conflict. May data reveal local production almost cut in half 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nonetheless, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Oil prices have actually been unpredictable, reducing 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+ enables a steady increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this background, the UAE will accelerate the building of a new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mainly by enhanced domestic need. However, they stay listed below long-run averages, with weak export orders and rate pressures from greater material and transport expenses are a common style. In general, we expect 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 years.