Advancing Industrial Success through Strategic Diversification

Threats are tilted to the disadvantage. In case of an extended dispute, the existing effects on the region will be compoundedthrough raised energy and food prices, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The existing crisis is a plain tip of the work ahead for the region: not only to weather shocks, but to rebuild more durable economies with more powerful macroeconomic principles, innovate and improve governance, purchase facilities, and increase employment-creating sectors," said.

With peace and the best action, nations can construct the institutions, capabilities and competitive sectors that produce opportunities for individuals." With this long-lasting vision in mind, the report takes a close appearance at the region's capacity for industrial policy federal government actions to increase tactical business activity as a driver of financial growth and job production.

ANSR July GCC PRs 50DR+

Governments in the region have actually embraced industrial policy at a high rate in the last years, typically through sovereign wealth funds and state-owned enterprises, however the results have been mixed. The report highlights the critical requirement for strong organizations and cautious targeting of policies. "As nations deal with the heavy toll of today dispute, it is very important to also not forget the work required for long-lasting peace and prosperity," said.

Foreign Investment Prospects across the GCC

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly economic forecast for the area prepared straight for the financing profession. The GCC economy faces a significant contraction this year pending information of the US-Iran agreement to end the war. We expect energy circulations, tourism and financier belief to slowly normalise as war disruptions diminish.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a significant step towards reaching a full-blown deal. A full go back to normality in the Strait of Hormuz will likely take time, however the risk of a recession-inducing oil rate spike has declined. Global GDP is anticipated to grow by 2.4% this year, 0.2 ppt less than we forecasted three months ago, 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 very first year of the Covid pandemic. Kuwait, Iran, Iraq and Qatar stand out as the hardest struck, owing to their failure to prevent the disturbance to local shipping, war-driven facilities damage and tourism losses.

Our 2026 outlook for the GCC is weaker than 3 months earlier, with GDP projection to agreement by 2.4% compared to a 0.2% decline forecasted previously. We anticipate 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 financial damage sustained in the last couple of months is significant. Saudi GDP information for Q1 revealed development 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.

The 2026 Business Landscape of Arabia

Aside from Oman, all GCC manufacturers in addition to Iran and Iraq have actually suffered extensive oil and gas production losses given that the start of the dispute. May data reveal regional production almost halved from pre-war levels, with the decrease 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 larger plunge in output.

ANSR July GCC PRs 50DR+

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

In the medium term, we expect oil costs to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits for a progressive increase in its output towards the 5mn barrel per day production target when trade normalises. Versus this background, the UAE will accelerate the building of a brand-new West-East pipeline that must double the capability of export through Fujairah.

The May PMI studies reported output growth reaching its greatest level in three months, driven largely by improved domestic demand. They stay listed below long-run averages, with weak export orders and price pressures from higher material and transportation costs are a typical theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a steady recovery over the remainder of the years.