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Risks are tilted to the drawback. In the event of a prolonged conflict, the present effect on the region will be compoundedthrough elevated energy and food costs, decreasing trade, tourist and remittances, increased financial pressures, and displacement. "The present crisis is a plain reminder of the work ahead for the area: not only to weather shocks, however to rebuild more resistant economies with more powerful macroeconomic principles, innovate and enhance governance, purchase facilities, and increase employment-creating sectors," stated.

With peace and the right action, countries can build the institutions, abilities and competitive sectors that produce opportunities for individuals." With this long-term vision in mind, the report takes a close look at the region's capacity for commercial policy federal government actions to increase tactical service activity as a driver of financial growth and task development.

ANSR July GCC PRs 50DR+

Governments in the area have embraced commercial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, but the outcomes have been mixed. The report highlights the critical requirement for strong organizations and mindful targeting of policies. "As countries face the heavy toll of the present dispute, it is important to also not lose sight of the work needed for long-lasting peace and prosperity," stated.

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Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the financing occupation. 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 financier belief to gradually normalise as war interruptions diminish.

ANSR July GCC PRs 50DR+

The interim agreement in between the United States and Iran is a substantial action towards reaching a full-blown offer. A full go back to normality in the Strait of Hormuz will likely take some time, but the risk 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 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% expansion before the war), greater than the decrease in the very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to avoid the disturbance to regional shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than three months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decrease forecasted previously. We anticipate Oman and Saudi Arabia to be the least negatively affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last few months is substantial. Saudi GDP information for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening 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 disturbance struck late in the quarter.

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Aside from Oman, all GCC producers as well as Iran and Iraq have actually suffered substantial oil and gas production losses given that the start of the conflict. May data show local production almost halved 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 helped prevent 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 decline in numerous decades. We then expect a 23.5% rebound next year, driven mostly by normalisation from a badly depressed base. On the other hand, oil prices have been unstable, reducing below $85 per barrel as the interim agreement was revealed.

In the medium term, we anticipate oil prices to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ permits a gradual increase in its output towards the 5mn barrel each day production target as soon as trade normalises. Versus this background, the UAE will speed up the construction of a new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI surveys reported output growth reaching its greatest level in 3 months, driven largely by enhanced domestic need. They remain below long-run averages, with weak export orders and cost pressures from greater product and transportation expenses are a typical 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 gradual healing over the rest of the decade.