The 2026 Investment Landscape in Arabia

Risks are tilted to the disadvantage. In case of a prolonged dispute, the present effect on the area will be compoundedthrough raised energy and food prices, declining trade, tourist and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark tip of the work ahead for the region: not just to weather shocks, however to restore more resistant economies with more powerful macroeconomic basics, innovate and enhance governance, buy facilities, and improve employment-creating sectors," stated.

With peace and the right action, countries can construct the institutions, abilities and competitive sectors that create opportunities for people." With this long-lasting vision in mind, the report takes a close take a look at the region's capacity for industrial policy government actions to increase strategic company activity as a motorist of economic growth and task development.

ANSR July GCC PRs 50DR+

Federal governments in the area have actually embraced commercial policy at a high rate in the last years, often through sovereign wealth funds and state-owned business, but the results have been blended. The report highlights the vital requirement for strong organizations and mindful targeting of policies. "As countries deal with the heavy toll of today dispute, it is essential to also not forget the work needed for lasting peace and prosperity," said.

Foreign Investment Prospects across the Middle East

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the financing profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran arrangement to end the war. We expect energy flows, tourism and financier belief to slowly normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the US and Iran is a significant step towards reaching a full-blown offer. A complete return to normality in the Strait of Hormuz will likely take some time, but the threat of a recession-inducing oil price spike has declined. Worldwide GDP is expected 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), greater than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stick out as the hardest struck, owing to their inability to prevent the interruption to local shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, 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 sustained in the last few months is substantial. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed since 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.

Evaluating GCC Investment Resilience in 2026

Aside from Oman, all GCC producers along with Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the dispute. May information reveal regional 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 helped avoid 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 decrease in several years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a seriously depressed base. Oil rates have actually been volatile, reducing listed below $85 per barrel as the interim arrangement 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+ permits for a gradual boost in its output towards the 5mn barrel daily production target once trade normalises. Versus this backdrop, the UAE will speed up the construction of a new West-East pipeline that should double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in three months, driven largely by improved domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and cost pressures from higher product and transportation costs are a typical theme. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the remainder of the years.