Key Industrial Shifts in 2026

Threats are tilted to the disadvantage. In the event of a prolonged conflict, the current effect on the region will be compoundedthrough elevated energy and food costs, declining trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain pointer of the work ahead for the area: not only to weather shocks, but to rebuild more resilient economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can construct the organizations, capabilities and competitive sectors that produce opportunities for individuals." With this long-lasting vision in mind, the report takes a close take a look at the region's potential for commercial policy government actions to increase strategic service activity as a chauffeur of financial development and task development.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned enterprises, however the results have actually been mixed. The report highlights the vital need for strong organizations and cautious targeting of policies. "As nations deal with the heavy toll of the present dispute, it is necessary to likewise not forget the work required for long-lasting peace and success," stated.

Top Foreign Investment Prospects in the GCC Market

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the region prepared directly for the financing 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 circulations, tourist and investor belief to gradually normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a significant step towards reaching a full-blown deal. A full return to normality in the Strait of Hormuz will likely take some time, however the danger of a recession-inducing oil price spike has actually decreased. International 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 forecast a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% expansion before the war), greater than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their inability to avoid the disturbance to regional shipping, war-driven infrastructure 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% decrease predicted formerly. 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 economic 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 rate given that 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 disruption hit late in the quarter.

The Future Investment Landscape in Arabia

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered extensive oil and gas production losses considering that the start of the conflict. Might information show local production nearly halved 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 assisted prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

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 mainly by normalisation from a significantly depressed base. On the other hand, oil prices have actually been unpredictable, relieving below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil costs to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables for a gradual boost in its output towards the 5mn barrel per day production target when trade normalises. Against this background, the UAE will accelerate the construction of a brand-new West-East pipeline that ought to double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in 3 months, driven largely by improved domestic demand. However, they stay below long-run averages, with weak export orders and price pressures from greater product and transport expenses are a common theme. In general, 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.