Top Foreign Investment Avenues for the GCC Market

Dangers are slanted to the drawback. In the occasion of an extended dispute, the existing influence on the area will be compoundedthrough raised energy and food rates, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a stark pointer of the work ahead for the area: not only to weather shocks, however to restore more resistant economies with more powerful macroeconomic principles, innovate and improve governance, buy facilities, and increase employment-creating sectors," stated.

With peace and the right action, countries can develop the institutions, abilities and competitive sectors that create opportunities for people." With this long-term vision in mind, the report takes a close take a look at the region's capacity for commercial policy government actions to increase tactical business activity as a driver of financial growth and task development.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced commercial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, but the results have been mixed. The report highlights the crucial need for strong institutions and careful targeting of policies. "As nations deal with the heavy toll of the present conflict, it is necessary to likewise not lose sight of the work needed for long-lasting peace and success," stated.

Upcoming Middle Eastern Economic Forecasts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared directly for the financing occupation. The GCC economy faces a significant contraction this year pending information of the US-Iran contract to end the war. We anticipate energy circulations, tourist and financier belief to gradually normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a significant action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil cost spike has actually decreased. Worldwide GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three 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), higher than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their failure to prevent the disruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decline projected 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 few months is significant. Saudi GDP data for Q1 showed growth slowed to 3% y/y, with non-oil activities broadening 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 disturbance struck late in the quarter.

Strategic Economic Shifts for the Future

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses considering that the start of the dispute. Might data reveal regional production nearly 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 helped prevent an even larger plunge in output.

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However, we forecast GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a significantly depressed base. Meanwhile, oil costs have actually been volatile, easing below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil rates to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ permits for a gradual increase in its output towards the 5mn barrel each day production target once trade normalises. Against this background, the UAE will accelerate the building of a brand-new West-East pipeline that must double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven mainly by enhanced domestic demand. However, they stay listed below long-run averages, with weak export orders and cost pressures from higher product and transportation costs are a typical style. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the rest of the decade.