Emerging Stock Market Trends for 2026

Risks are slanted to the drawback. In the event of an extended dispute, the current influence on the area will be compoundedthrough elevated energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark pointer of the work ahead for the area: not just to weather shocks, however to restore more durable economies with stronger macroeconomic principles, innovate and improve governance, purchase facilities, and boost employment-creating sectors," stated.

With peace and the best action, countries can develop the institutions, abilities and competitive sectors that develop opportunities 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 federal government actions to increase tactical company activity as a chauffeur of financial development and job production.

ANSR July GCC PRs 50DR+

Governments in the area have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have been mixed. The report highlights the important requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present conflict, it is necessary to likewise not forget the work needed for long-lasting peace and success," stated.

The 2026 Business Landscape of Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the finance profession. The GCC economy faces a significant contraction this year pending details of the US-Iran contract to end the war. We expect energy flows, tourism and investor sentiment to gradually normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim contract between the United States 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 take some time, but the threat of a recession-inducing oil rate spike has actually decreased. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we forecasted three months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% growth 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 struck, owing to their failure to prevent the disturbance to local 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% decline projected previously. We expect Oman and Saudi Arabia to be the least negatively affected by the fallout from the dispute, with both economies continuing to broaden this year.

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

Accelerating Economic Success through Strategic Diversification

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered extensive oil and gas production losses since the start of the dispute. May data reveal regional production almost 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 assisted avoid an even larger plunge in output.

ANSR July GCC PRs 50DR+

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

In the medium term, we anticipate oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a steady boost in its output towards the 5mn barrel per day production target as soon as trade normalises. Against this backdrop, the UAE will speed up the building of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI surveys reported output development reaching its strongest level in three months, driven mostly by improved domestic demand. Nevertheless, they remain below long-run averages, with weak export orders and rate pressures from greater product and transport expenses 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 progressive healing over the rest of the years.