Foreign Investment Prospects across the Middle East

Dangers are tilted to the downside. In the occasion of an extended dispute, the existing effect on the region will be compoundedthrough raised energy and food prices, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark suggestion of the work ahead for the region: not only to weather shocks, however to restore more durable economies with stronger macroeconomic fundamentals, innovate and enhance governance, buy facilities, and boost employment-creating sectors," said.

With peace and the ideal action, nations can construct the institutions, abilities and competitive sectors that develop opportunities for individuals." With this long-term vision in mind, the report takes a close take a look at the area's potential for industrial policy government actions to increase strategic organization activity as a chauffeur of financial development and job development.

ANSR July GCC PRs 50DR+

Federal governments in the area have adopted industrial policy at a high rate in the last years, frequently through sovereign wealth funds and state-owned business, however the results have actually been mixed. The report highlights the crucial need for strong institutions and careful targeting of policies. "As countries face the heavy toll of today dispute, it is essential to likewise not lose sight of the work required for lasting peace and prosperity," stated.

Assessing GCC Investment Resilience in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the finance occupation. The GCC economy deals with a marked contraction this year pending details of the US-Iran arrangement to end the war. We anticipate energy flows, tourist and investor belief to slowly normalise as war interruptions subside.

ANSR July GCC PRs 50DR+

The interim arrangement in between the United States and Iran is a substantial action towards reaching a full-blown offer. A full return to normality in the Strait of Hormuz will likely take some time, however the risk of a recession-inducing oil price spike has decreased. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months ago, 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 apart as the hardest struck, owing to their inability to avoid the interruption to regional shipping, war-driven infrastructure damage and tourist losses.

Our 2026 outlook for the GCC is weaker than three months ago, with GDP projection to agreement by 2.4% compared to a 0.2% decline projected formerly. We anticipate Oman and Saudi Arabia to be the least adversely affected by the fallout from the dispute, with both economies continuing to broaden this year.

The economic damage incurred in the last few months is considerable. Saudi GDP data for Q1 revealed development slowed to 3% y/y, with non-oil activities broadening by 2.9%, the weakest pace since 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 International Investment Avenues in the GCC Region

Aside from Oman, all GCC manufacturers as well as Iran and Iraq have suffered substantial oil and gas production losses given that the start of the conflict. May information reveal regional production nearly cut in half 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 larger 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 years. We then anticipate a 23.5% rebound next year, driven mainly by normalisation from a severely depressed base. Meanwhile, oil rates have actually been unstable, relieving listed below $85 per barrel as the interim contract was announced.

In the medium term, we expect oil rates to be slightly lower than our pre-war baseline, as the UAE's departure from OPEC+ permits a progressive boost in its output towards the 5mn barrel each day production target when trade normalises. Versus this backdrop, the UAE will speed up the construction of a brand-new West-East pipeline that ought to double the capacity of export through Fujairah.

The May PMI studies reported output growth reaching its strongest level in 3 months, driven mainly by improved domestic need. However, they stay below long-run averages, with weak export orders and price pressures from greater material 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 progressive healing over the remainder of the decade.