Assessing Regional Market Potential in 2026

Threats are tilted to the disadvantage. In the event of an extended dispute, the existing effects on the region will be compoundedthrough raised energy and food costs, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark reminder of the work ahead for the area: not just to weather shocks, but to restore more durable economies with stronger macroeconomic principles, innovate and enhance governance, invest in infrastructure, and increase employment-creating sectors," said.

With peace and the right action, countries can develop the institutions, capabilities and competitive sectors that create chances for people." With this long-lasting vision in mind, the report takes a close look at the area's capacity for commercial policy federal government actions to increase strategic business activity as a motorist of financial development and job creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced industrial policy at a high rate in the last decade, frequently through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the vital need for strong institutions and cautious targeting of policies. "As nations deal with the heavy toll of the present conflict, it is necessary to also not forget the work needed for long-lasting peace and success," said.

Essential Stock Market Strategies for GCC Growth

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the region prepared directly for the finance profession. The GCC economy deals with a significant contraction this year pending details of the US-Iran agreement to end the war. We anticipate energy flows, tourism and financier belief to slowly normalise as war disturbances subside.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a substantial action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, however the threat 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 3 months back, 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 decline 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 tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decline forecasted formerly. We expect Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to broaden this year.

The financial damage incurred in the last few months is considerable. Saudi GDP information for Q1 revealed growth slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest pace because 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 struck late in the quarter.

How Economic Shifts Will Transform Arabian Markets

Aside from Oman, all GCC producers along with Iran and Iraq have suffered substantial oil and gas production losses because the start of the conflict. May data reveal local production almost 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 helped avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, we forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in a number of years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. Oil costs have actually been unstable, reducing below $85 per barrel as the interim agreement was announced.

In the medium term, we expect oil costs to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel each day production target when trade normalises. Versus this background, the UAE will accelerate the building and construction of a new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its greatest level in 3 months, driven mostly by enhanced domestic demand. They stay below long-run averages, with weak export orders and cost pressures from higher material and transport costs are a common style. In general, we anticipate 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.