Future Regional Financial Projections

Risks are tilted to the disadvantage. In case of an extended dispute, the existing influence on the region will be compoundedthrough elevated energy and food costs, declining trade, tourist and remittances, increased financial pressures, and displacement. "The current crisis is a plain suggestion of the work ahead for the area: not only to weather shocks, but to reconstruct more resilient economies with more powerful macroeconomic fundamentals, innovate and enhance governance, invest in facilities, and improve employment-creating sectors," said.

With peace and the right action, countries can develop the institutions, abilities and competitive sectors that produce chances for people." With this long-term vision in mind, the report takes a close take a look at the area's potential for commercial policy government actions to increase strategic organization activity as a driver of economic development and job production.

ANSR July GCC PRs 50DR+

Federal governments in the region have embraced industrial 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 critical requirement for strong institutions and mindful targeting of policies. "As countries face the heavy toll of today dispute, it is essential to also not lose sight of the work needed for lasting peace and success," said.

The Future Investment Landscape of Arabia

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the financing 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, tourism and investor belief to gradually normalise as war disruptions decrease.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a significant action towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely take time, but the danger of a recession-inducing oil rate spike has declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted 3 months earlier, and 3.1% in 2027.

We forecast a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher than the decline in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their inability to avoid the disruption to local shipping, war-driven infrastructure damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to contract by 2.4% compared to a 0.2% decrease projected previously. 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 economic damage incurred in the last few months is significant. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest speed considering that 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 hit late in the quarter.

Future GCC Economic Projections

Aside from Oman, all GCC producers in addition to Iran and Iraq have actually suffered extensive oil and gas production losses because the start of the conflict. Might information reveal regional production nearly halved from pre-war levels, with the decline 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 assisted avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We anticipate GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decrease in several years. We then anticipate a 23.5% rebound next year, driven mostly by normalisation from a severely depressed base. Meanwhile, oil costs have been unpredictable, easing below $85 per barrel as the interim contract 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+ allows for a gradual increase in its output towards the 5mn barrel daily production target as soon as trade normalises. Versus this backdrop, the UAE will accelerate the building 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 mainly by improved domestic need. Nevertheless, they stay listed below long-run averages, with weak export orders and rate pressures from greater material and transport expenses are a common style. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual recovery over the remainder of the decade.