Positioning Regional Portfolios against 2026 Shifts

Risks are tilted to the drawback. In case of an extended dispute, the current influence on the region will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased financial pressures, and displacement. "The present crisis is a plain tip of the work ahead for the region: not only to weather shocks, but to restore more resistant economies with stronger macroeconomic principles, innovate and improve governance, purchase infrastructure, and improve employment-creating sectors," stated.

With peace and the right action, nations can construct the institutions, abilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close look at the area's capacity for commercial policy federal government actions to increase strategic service activity as a chauffeur of financial growth and task development.

ANSR July GCC PRs 50DR+

Governments in the region have adopted commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned business, however the outcomes have been blended. The report highlights the crucial requirement for strong organizations and cautious 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 long-lasting peace and prosperity," stated.

Optimizing Capital Diversification in a 2026 Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the financing profession. The GCC economy faces 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 slowly normalise as war disturbances diminish.

ANSR July GCC PRs 50DR+

The interim contract between the United States 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, however the threat of a recession-inducing oil price spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months back, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to avoid the disruption to regional shipping, war-driven facilities damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, 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 adversely affected by the fallout from the conflict, with both economies continuing to broaden this year.

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

Why Industrial Shifts Can Transform GCC Markets

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered comprehensive oil and gas production losses because the start of the conflict. May information show local production nearly halved from pre-war levels, with the decline 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 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 decrease in a number of years. We then expect a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. On the other hand, oil costs have actually been volatile, reducing listed below $85 per barrel as the interim contract was announced.

In the medium term, we anticipate oil prices to be somewhat lower than our pre-war standard, as the UAE's departure from OPEC+ permits a progressive increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Against this background, the UAE will speed up 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 three months, driven largely by improved domestic demand. They stay below long-run averages, with weak export orders and rate pressures from greater material and transportation costs are a typical theme. In general, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual healing over the remainder of the decade.