Top International Capital Prospects for the GCC Market

Dangers are tilted to the drawback. In the event of a prolonged conflict, the current effects on the area will be compoundedthrough raised energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a plain tip of the work ahead for the area: not just to weather shocks, however to reconstruct more durable economies with more powerful macroeconomic fundamentals, innovate and improve governance, invest in infrastructure, and boost employment-creating sectors," said.

With peace and the right action, nations 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 region's potential for commercial policy government actions to increase strategic organization activity as a motorist of financial development and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the region have actually embraced industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, but the outcomes have been blended. The report highlights the important requirement for strong organizations and mindful targeting of policies. "As nations deal with the heavy toll of today dispute, it is crucial to also not lose sight of the work needed for long-lasting peace and prosperity," stated.

Upcoming Middle Eastern Economic Forecasts

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the area prepared straight for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy circulations, tourist and investor belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim contract between the US and Iran is a significant action towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take time, but the risk of a recession-inducing oil cost spike has actually declined. Worldwide GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted 3 months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus predicted 3.6% growth before the war), higher 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 prevent the disruption to regional shipping, war-driven infrastructure 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 previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, 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 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace considering 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.

Why Industrial Diversification Will Transform Arabian Markets

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered comprehensive oil and gas production losses considering that the start of the conflict. May data reveal regional 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 assisted prevent an even larger plunge in output.

ANSR July GCC PRs 50DR+

We forecast 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 mainly by normalisation from a seriously depressed base. Oil rates have been volatile, easing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we anticipate oil rates to be a little lower than our pre-war baseline, as the UAE's departure from OPEC+ enables a steady increase in its output towards the 5mn barrel each day production target once trade normalises. Versus this backdrop, the UAE will accelerate the building and construction of a new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mainly by improved domestic need. However, they remain listed below long-run averages, with weak export orders and price pressures from higher material and transportation 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 steady recovery over the rest of the years.