Essential Equity Market Insights for Regional Investors

Dangers are slanted to the drawback. In the event of an extended conflict, the existing effects on the area will be compoundedthrough elevated energy and food rates, decreasing trade, tourism and remittances, increased fiscal pressures, and displacement. "The present crisis is a stark pointer of the work ahead for the region: not just to weather shocks, but to restore more resilient economies with more powerful macroeconomic principles, innovate and improve governance, invest in facilities, and increase employment-creating sectors," stated.

With peace and the ideal action, countries can construct the institutions, capabilities and competitive sectors that produce chances 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 government actions to increase tactical service activity as a chauffeur of economic growth and task production.

ANSR July GCC PRs 50DR+

Governments in the area have actually adopted industrial policy at a high rate in the last decade, typically through sovereign wealth funds and state-owned enterprises, but the results have actually been blended. The report highlights the vital need for strong organizations and careful targeting of policies. "As countries deal with the heavy toll of the present dispute, it is essential to also not lose sight of the work needed for long-lasting peace and success," said.

Future Regional Financial Outlook

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial projection for the region prepared directly for the finance occupation. 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 investor sentiment to gradually normalise as war disturbances go away.

ANSR July GCC PRs 50DR+

The interim arrangement between the United States and Iran is a substantial step towards reaching a full-blown deal. A complete go back to normality in the Strait of Hormuz will likely require time, but the danger of a recession-inducing oil price spike has actually declined. Worldwide GDP is anticipated 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 projected 3.6% growth before the war), higher 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 inability to avoid the disruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than 3 months back, with GDP forecast to agreement by 2.4% compared to a 0.2% decline projected 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 economic damage sustained in the last few months is considerable. Saudi GDP information for Q1 showed 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 disruption struck late in the quarter.

Key Industrial Expansion in 2026

Aside from Oman, all GCC manufacturers along with Iran and Iraq have actually suffered extensive oil and gas production losses considering that the start of the conflict. May data show regional production nearly 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 helped avoid an even bigger plunge in output.

ANSR July GCC PRs 50DR+

We forecast GCC oil sector output to agreement by 14.5% this year, which will mark the steepest decline in several decades. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a badly depressed base. Oil rates have actually been unpredictable, reducing listed 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 standard, as the UAE's departure from OPEC+ permits a progressive boost in its output towards the 5mn barrel each day production target once trade normalises. Versus this background, the UAE will accelerate the building and construction of a new West-East pipeline that must double the capability of export through Fujairah.

The May PMI surveys reported output growth reaching its strongest level in three months, driven mostly by improved domestic demand. They remain listed below long-run averages, with weak export orders and cost pressures from higher material and transportation expenses are a common theme. Overall, we expect a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% development pre-war) and a gradual healing over the rest of the decade.