Top International Capital Prospects in the GCC Region

Dangers are slanted to the drawback. In the event of a prolonged conflict, the current influence on the area will be compoundedthrough elevated energy and food rates, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a stark suggestion of the work ahead for the region: not only to weather shocks, but to restore more durable economies with more powerful macroeconomic principles, innovate and improve governance, invest in infrastructure, and boost employment-creating sectors," stated.

With peace and the best action, nations can build the institutions, capabilities and competitive sectors that produce opportunities for people." With this long-lasting vision in mind, the report takes a close take a look at the area's capacity for industrial policy federal government actions to increase strategic service activity as a motorist of financial growth and task creation.

ANSR July GCC PRs 50DR+

Federal governments in the area have embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the outcomes have actually been blended. The report highlights the important need for strong institutions and careful targeting of policies. "As nations face the heavy toll of the present dispute, it is important to also not lose sight of the work required for lasting peace and success," stated.

Strategic Economic Expansion for the Future

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic projection for the area prepared straight for the finance occupation. The GCC economy deals with a marked contraction this year pending information of the US-Iran agreement to end the war. We anticipate energy flows, tourist and financier sentiment to gradually normalise as war interruptions go away.

ANSR July GCC PRs 50DR+

The interim contract in between the United States and Iran is a considerable action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take time, however the danger of a recession-inducing oil price spike has declined. International GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we projected 3 months earlier, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus projected 3.6% expansion before the war), higher than the decrease in the first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest hit, owing to their failure to prevent the disruption to regional shipping, war-driven facilities damage and tourist 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 affected by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last couple of months is significant. Saudi GDP data for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest rate given that 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 disturbance struck late in the quarter.

Why Economic Shifts Can Shape GCC Markets

Aside from Oman, all GCC producers along with Iran and Iraq have actually suffered extensive oil and gas production losses since the start of the conflict. May information reveal regional production almost 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 actually helped prevent an even bigger plunge in output.

ANSR July GCC PRs 50DR+

Nevertheless, 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 mainly by normalisation from a badly depressed base. On the other hand, oil costs have been unstable, easing below $85 per barrel as the interim contract was revealed.

In the medium term, we anticipate oil rates to be slightly lower than our pre-war standard, as the UAE's departure from OPEC+ enables for a gradual increase in its output towards the 5mn barrel per day production target once trade normalises. Against this background, the UAE will accelerate the building of a brand-new West-East pipeline that must double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in three months, driven largely by enhanced domestic need. They remain below long-run averages, with weak export orders and price pressures from greater material and transport costs are a typical theme. Overall, we expect 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.