Middle East Equity Market Trends in 2026

Risks are slanted to the downside. In the event of a prolonged conflict, the current effect on the area will be compoundedthrough elevated energy and food costs, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not only to weather shocks, but to restore more resilient economies with stronger macroeconomic principles, innovate and enhance governance, buy facilities, and increase employment-creating sectors," said.

With peace and the best action, countries can construct the institutions, capabilities and competitive sectors that develop chances for individuals." With this long-term vision in mind, the report takes a close take a look at the area's capacity for industrial policy government actions to increase tactical company activity as a motorist of economic growth and job production.

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 blended. The report highlights the vital requirement for strong institutions and careful targeting of policies. "As nations deal with the heavy toll of the present conflict, it is important to likewise not lose sight of the work required for lasting peace and success," said.

Optimizing Capital Strategies in a Global Economy

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the financing occupation. The GCC economy faces a marked contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy flows, tourist and investor sentiment to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the US and Iran is a significant step towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely require time, however the threat of a recession-inducing oil cost spike has declined. International GDP is expected to grow by 2.4% this year, 0.2 ppt less than we projected three months ago, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), greater than the decrease 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 3 months ago, with GDP forecast to contract by 2.4% compared to a 0.2% decrease projected previously. We expect Oman and Saudi Arabia to be the least adversely affected by the fallout from the dispute, with both economies continuing to broaden this year.

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

Essential Industrial Shifts in the Future

Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered extensive oil and gas production losses because the start of the dispute. May information reveal local production nearly cut in half 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 larger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate 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 largely by normalisation from a seriously depressed base. Meanwhile, oil rates have actually been unpredictable, reducing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil prices to be a little lower than our pre-war standard, as the UAE's departure from OPEC+ enables for a progressive boost in its output towards the 5mn barrel per day production target when trade normalises. Versus this backdrop, the UAE will speed up the construction of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in 3 months, driven mostly by enhanced domestic need. However, they stay listed below long-run averages, with weak export orders and rate pressures from higher material and transport expenses are a typical style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a progressive recovery over the rest of the years.