Key Foreign Investment Avenues for the GCC Region

Dangers are slanted to the downside. In case of an extended dispute, the present effect on the region will be compoundedthrough raised energy and food costs, declining trade, tourism and remittances, increased fiscal pressures, and displacement. "The current crisis is a stark reminder of the work ahead for the area: not only to weather shocks, but to reconstruct more resilient economies with more powerful macroeconomic principles, innovate and improve governance, buy facilities, and enhance employment-creating sectors," said.

With peace and the best action, countries can construct the organizations, abilities and competitive sectors that develop chances for individuals." With this long-term vision in mind, the report takes a close appearance at the region's capacity for industrial policy government actions to increase tactical company activity as a motorist of economic growth and job creation.

ANSR July GCC PRs 50DR+

Governments in the area have actually adopted industrial policy at a high rate in the last decade, often through sovereign wealth funds and state-owned business, however the results have been mixed. The report highlights the critical requirement for strong institutions and cautious targeting of policies. "As countries face the heavy toll of the present dispute, it is crucial to likewise not forget the work needed for long-lasting peace and prosperity," said.

Essential Industrial Shifts in 2026

Q2 2026: The ICAEW Economic Update Middle East, is a quarterly financial forecast for the area prepared directly for the finance profession. The GCC economy deals with a significant contraction this year pending information of the US-Iran arrangement to end the war. We anticipate energy circulations, tourism and investor sentiment to gradually normalise as war disruptions subside.

ANSR July GCC PRs 50DR+

The interim agreement between the US and Iran is a significant step towards reaching a full-blown deal. A complete return to normality in the Strait of Hormuz will likely take some time, but the risk of a recession-inducing oil cost spike has actually declined. Global GDP is expected to grow by 2.4% this year, 0.2 ppt less than we predicted three months earlier, and 3.1% in 2027.

We anticipate a 4.1% contraction in Middle East GDP this year (versus forecasted 3.6% growth before the war), higher than the decline 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 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 contract by 2.4% compared to a 0.2% decrease predicted previously. We anticipate Oman and Saudi Arabia to be the least adversely impacted by the fallout from the conflict, with both economies continuing to expand this year.

The economic damage sustained in the last few months is significant. Saudi GDP information for Q1 showed development slowed to 3% y/y, with non-oil activities expanding by 2.9%, the weakest speed 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 hit late in the quarter.

Foreign Capital Prospects within the GCC

Aside from Oman, all GCC producers as well as Iran and Iraq have suffered comprehensive oil and gas production losses because the start of the conflict. Might data reveal regional production nearly halved from pre-war levels, with the decrease 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+

However, we anticipate GCC oil sector output to contract by 14.5% this year, which will mark the steepest decline in a number of decades. We then expect a 23.5% rebound next year, driven largely by normalisation from a badly depressed base. Meanwhile, oil prices have actually been unstable, reducing below $85 per barrel as the interim arrangement was announced.

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

The May PMI studies reported output development reaching its greatest level in 3 months, driven mostly by enhanced domestic need. They stay below long-run averages, with weak export orders and price pressures from higher material and transport costs are a common theme. Overall, we anticipate a 1.1% contraction in GCC non-energy sectors this year (compared to 4.2% growth pre-war) and a gradual recovery over the remainder of the decade.