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Dangers are slanted to the downside. In case of a prolonged conflict, the existing effect on the area will be compoundedthrough elevated energy and food rates, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain reminder of the work ahead for the region: not only to weather shocks, however to reconstruct more resilient economies with more powerful macroeconomic principles, innovate and enhance governance, invest in infrastructure, and increase employment-creating sectors," stated.

With peace and the ideal action, countries can develop the organizations, capabilities and competitive sectors that produce chances for people." With this long-lasting vision in mind, the report takes a close take a look at the region's capacity for commercial policy government actions to increase tactical company activity as a motorist of economic growth and task production.

ANSR July GCC PRs 50DR+

Governments in the region have adopted industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been blended. The report highlights the critical requirement for strong institutions and careful targeting of policies. "As nations deal with the heavy toll of today dispute, it is very important to also not lose sight of the work required for lasting peace and prosperity," stated.

The 2026 Business Landscape of the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared directly for the finance profession. 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, tourism and investor belief to gradually normalise as war interruptions subside.

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The interim arrangement in between the United States and Iran is a considerable action towards reaching a full-blown offer. A complete go back to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil cost spike has declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, 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 decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand apart as the hardest hit, owing to their failure to avoid the disruption to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to contract by 2.4% compared to a 0.2% decline forecasted formerly. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the dispute, with both economies continuing to expand this year.

The financial damage sustained in the last couple of months is significant. Saudi GDP data for Q1 revealed growth slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest rate 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 interruption struck late in the quarter.

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

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Nonetheless, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decrease in several decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a seriously depressed base. On the other hand, oil costs have actually been unstable, reducing listed below $85 per barrel as the interim arrangement was announced.

In the medium term, we expect oil rates to be somewhat lower than our pre-war baseline, as the UAE's departure from OPEC+ allows for a gradual increase in its output towards the 5mn barrel per day production target once trade normalises. Against this backdrop, the UAE will speed up the construction of a brand-new West-East pipeline that need to double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in three months, driven largely by enhanced domestic demand. They remain listed below long-run averages, with weak export orders and price pressures from greater material and transportation costs are a common style. In general, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a steady recovery over the remainder of the decade.